Asian Development Bank upgrades India’s GDP growth forecast for FY25 to 7%

Representation image (File Photo)


The Asian Development Bank (ADB) upgraded India’s gross domestic product (GDP) growth forecast for Financial Year 2024-25 to 7% from its earlier projection of 6.7%.

ADB citied robust public and private investments and strong services sector for the revised number.

However, it said unanticipated global events such as supply line disruptions to crude oil markets and weather shocks to agriculture are key risks to India’s economic outlook.

In its flagship economic publication, ‘Asian Development Outlook (ADO) April 2024’, the ADB said the growth momentum will pick up in FY26, backed by improved goods exports and an increase in manufacturing productivity and agricultural output.

“The triggers for growth in FY25 will come from higher capital expenditure on infrastructure development both by central and state governments, rise in private corporate investment, strong service sector performance and improved consumer confidence,” it said.

ADB said a 17% rise in central government capital expenditure in FY25, compared to the previous financial year, together with transfers to state governments will boost infrastructure investment.

“A new government initiative to support urban housing for middle-income households is expected to further spur housing growth. Private corporate investment is expected to get a boost with stable interest rates. With inflation moderating to 4.6% in FY25 and easing further to 4.5% in FY26, monetary policy may become less restrictive, which will facilitate rapid offtake of bank credit,” ADB said.

“Demand for financial, real estate and professional services will grow while manufacturing will benefit from muted input cost pressures that will boost industry sentiment. Expectations of a normal monsoon will help boost growth of the agriculture sector.”

Further, the report said foreign direct investment will be affected in the near term due to tight global financial conditions but will pick up in FY26 with higher industry and infrastructure investment.

“Goods exports will also be affected by lower growth in advanced economies but pick up in FY26 as global growth improves.”

Notably, last week, at the first MPC meeting of the RBI for the Financial Year 2025.

The RBI projected the real GDP growth at 7% for 2024-25. Giving the quarterly GDP breakup, the governor had said, real gdp growth for Q1 2024-25 is projected at 7.1%, for Q2 at 6.9%, Q3 at 7% and Q4 at 7%, the risks are evenly balanced.