ADB retains India's FY25 growth forecast at 7%

GDP forecast retained at 7%

The Asian Development Bank (ADB) has retained India’s growth forecast at 7 percent for the current fiscal, projecting faster growth of 7.2 percent in FY26 in its report released on September 25.

“India’s economy has shown remarkable resilience in the face of global geopolitical challenges and is poised for steady growth,” ADB country director for India Mio Oka said.

The forecast is in line with the Reserve Bank of India 7 percent growth prediction for the current fiscal.

“An above-average monsoon in most parts of the country will lead to strong agricultural growth, enhancing the rural economy in FY25,” it noted.

Inflation is likely to ramp up faster than anticipated, according to ADB’s September outlook.

The multilateral institution projected inflation to grow faster at 4.7 percent compared with 4.6 percent in the April report.

“Consumer inflation is anticipated to rise to 4.7 percent in FY2024 due to elevated food prices, despite higher agriculture output expectations. This has prevented India’s central bank from adopting a more accommodative monetary policy,” the report noted.

Inflation is likely to lower to 4.5 percent in FY26.

“Monetary policy is expected to become less restrictive but not as soon as expected earlier,” it said.

The current account deficit is expected to widen to 1 percent to FY25 and to 1.2 percent in the next year.

"Exports in FY2024 will be higher than earlier projected, led by larger services exports, particularly in IT and professional services. Growth in merchandise exports will be relatively muted in FY2024 and FY2025, though some segments, notably electronics, may experience faster growth," ADB said.

“Geopolitical shocks may affect global supply chains and commodity prices, while weather shocks may pose risks to agricultural output. Another downside risk in FY2024 is the failure of government to meet its capital expenditure target,” it further added.