ADB keeps 7% growth forecast unchanged for Indian economy in FY25

ADB raises growth

Asian Development Bank kept India’s FY25 growth forecast unchanged at 7 percent from its April outlook, according to its latest report released on July 17.

The Asian lender projected the economy to grow faster at 7.2 percent in FY26.

“After muted growth in FY24, a rebound in agriculture is expected given the above-normal monsoon projections. This is notwithstanding the slower advance of the monsoon in June,” ADB noted.

It further pointed out that investment demand continues to be strong, buoyed by private investments.

The central government had budgeted an outlay Rs 11.1 lakh crore on capex for FY25.

“The stronger-than-expected fiscal position of the central government could provide a further boost to growth. However, this must be weighed against downside risks arising from weather events and geopolitical shocks,” the Manila-based institution said.

The bank expects services growth to trump merchandise growth again in FY25. India’s services exports rose 4.9 percent to $341 billion in FY24, even as merchandise exports were down from the previous fiscal.

On the inflation front, ADB projected a decline to 4.6 percent in the current fiscal, declining to 4.5 percent in FY26, closer to the 4 percent target of the central bank.

The Reserve Bank of India’s Monetary Policy Committee is likely to keep policy rates on hold for the ninth consecutive time at its meeting in August.

India’s inflation crossed 5 percent mark in June, as food inflation galloped to 9.4 percent from 8.7 percent in May.

Inching up to 7 percent

The announcement follows International Monetary Fund’s forecast upgrade for India’s FY25 growth to 7 percent from 6.8 percent projected in April.

IMF had noted that strong growth in FY24 and expectations of consumption recovery had prompted an upgrade.

The forecasts by multilateral institutions are still lower than RBI’s projection of 7.2 percent, which it had upped from 7 percent in June.

Indian economy is expected to growth over 7 percent for four consecutive years. It had logged 8.2 percent growth in the previous fiscal.

Better outlook for Asia

The forecast for Asia received an upgrade to 5 percent from 4.9 percent projected in April.

“Most of Asia and the Pacific is seeing faster economic growth compared with the second half of last year,” said Albert Park, chief economist, ADB.

The Manila-lender cited uncertainty related to election outcomes in major economies to interest rate decisions and geopolitical tensions as risks.