ADB Maintains India's Growth Forecast At 6.4% For FY24
The Asian Development Bank (ADB) has maintained India's economic growth forecast at 6.4 per cent for FY24, citing a recovery in consumption demand in rural and urban areas. However, the bank warned that suppressed exports due to the global slowdown could act as a drag on growth. The Indian economy registered a growth of 7.2 per cent in 2022-23.
In its Asian Development Outlook (ADO) update, ADB revised its inflation projection for FY24 to 4.9 per cent, down from the earlier estimate of 5 per cent, attributing it to softening crude oil prices. Nevertheless, the bank expects core inflation to remain "stubbornly high".
The growth forecast for the current fiscal year is based on the assumption of normal rainfall and weather conditions, along with no further geopolitical shocks. ADB anticipates India's growth to be 6.7 per cent in FY2024.
ADB highlighted that consumption demand is expected to rebound in the current fiscal year, driven by improvements in both rural and urban demand, as evidenced by indicators like consumer confidence, urban unemployment, and motorbike sales. Investment growth is projected to remain robust, supported by strong bank credit growth, housing demand, and fewer interest rate hikes by the central bank.
However, the slowdown in global economic conditions has impacted merchandise trade, which may hinder growth. On the supply side, manufacturing is expected to boost growth as input prices cool down.
Regarding inflation, ADB noted that food and oil prices have moderated, leading to inflation falling below the 6 per cent upper tolerance level set by the monetary policy. Although the expected softening of Brent crude prices may lower headline inflation, ADB anticipates that core inflation, which excludes food and fuel, will remain high.
Across Asia and the Pacific, developing economies are expected to grow at 4.8 per cent in 2023, supported by robust domestic demand. Inflation is also projected to decline as fuel and food prices decrease. The growth forecast for 2024 has been marginally revised down to 4.7 per cent from the previous estimate of 4.8 per cent, primarily due to a slowdown in demand for electronics and other manufactured goods exports from the region.
China's economy is projected to expand by 5 per cent in 2023, driven by strong domestic demand in the services sector. In 2024, China's GDP is expected to grow by 4.5 per cent.
ADB's Chief Economist, Albert Park, emphasised that Asia and the Pacific are steadily recovering from the pandemic, supported by domestic demand and services activity. However, industrial activity and exports remain weak, and the global growth outlook for next year has worsened.
