The Asian Development Bank (ADB) announced on Wednesday that it is maintaining its GDP growth forecast for India at 7% for the current financial year, attributing this stability to a projected rebound in agriculture due to above-normal monsoon forecasts.
This forecast comes just a day after the International Monetary Fund (IMF) revised its GDP growth projection for India upwards to 7%, compared to the 6.8% it had projected in April. Additionally, the Reserve Bank of India (RBI) also recently revised its growth forecast upward to 7.2% from the previous estimate of 7%.
The report highlights that the Indian economy achieved a growth rate of 8.2% for the financial year ending March 2024, compared to 7% in the previous fiscal year.
The ADB report noted that the services sector continued to expand robustly in the fourth quarter of FY24, with the forward-looking services PMI well above its long-term average. The industrial sector is also expected to experience robust growth, driven by manufacturing and strong demand for construction, particularly in housing.
"After muted growth in FY2023, a rebound in agriculture is expected given the above-normal monsoon projections, despite the slower advance of the monsoon in June. This rebound will be crucial to sustaining growth momentum in rural areas," the report stated.
The ADB also mentioned that the central government's stronger-than-expected fiscal position could provide an additional boost to growth.
Nonetheless, the report cautioned that downside risks from weather events and geopolitical shocks must be considered.
In terms of inflation, the ADB has retained its forecast at 4.6% for the current financial year, with a slight decline to 4.5% expected in the next fiscal year.
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