ADB raises India's GDP growth forecast for FY25 to 7% on robust investment, consumer demand

The Asian Development Bank (ADB) on Thursday raised India's GDP growth forecast for the current fiscal to 7 per cent from 6.7 per cent earlier, saying the robust growth will be driven by public and private sector investment demand and gradual improvement in consumer demand.

The 2024-25 growth estimate is, however, lower than 7.6 per cent projected for the 2022-23 fiscal. Strong investment drove GDP growth in the 2022-23 fiscal as consumption was muted, the ADB said.

The ADB had in December last year projected the Indian economy to expand 6.7 per cent in the 2024-25 fiscal.

"The economy grew robustly in fiscal 2023 with strong momentum in manufacturing and services. It will continue to grow rapidly over the forecast horizon. Growth will be driven primarily by robust investment demand and improving consumption demand. Inflation will continue its downward trend in tandem with global trends," said the April edition of the Asian Development Outlook released on Friday.

Growth will be robust despite moderating in FY2024 and FY2025, it said. For the 2025-26 fiscal, the ADB has projected India's growth at 7.2 per cent.

The ADB said exports are likely to be relatively muted this fiscal as growth in major advanced economies slows down but will improve in FY2025.

"Monetary policy is expected to remain supportive of growth as inflation abates, while fiscal policy aims for consolidation but retains support for capital investment.

On balance, growth is forecast to slow to seven per cent in FY2024 but improve to 7.2 per cent in FY2025," it said To boost exports in the medium term, India needs greater integration into global value chains, the ADB added.

The ADB's growth forecast for FY25 is in line with the projections made by the Reserve Bank of India (RBI).

The RBI last week had said GDP growth in the current fiscal is projected at seven per cent on expectations of normal monsoon, moderating inflationary pressures and sustained momentum in manufacturing and services sectors.