ADB Upgrades India's FY24 Growth Projection To 6.7% From 6.3%

The Asian Development Bank (ADB) has revised India's economic growth projection for the Financial Year 2023-24 to 6.7 per cent, up from the earlier 6.3 per cent forecast in September.

This adjustment is attributed to India's stronger-than-expected GDP growth of 7.6 per cent in the September quarter, particularly in the industrial sector encompassing manufacturing, mining, construction and utilities. The report indicates that while agricultural growth might be slightly slower than anticipated for FY2024, it will be outweighed by the robust growth in the industrial sector, leading to the upward revision.

However, ADB's growth forecast for FY25 remains steady at 6.7 per cent.

The report highlights that increased capital spending by both the central and state governments will boost growth in fixed investment, compensating for lower growth in private consumption expenditure and weaker-than-expected exports.

ADB maintains its previous inflation forecasts for India, expecting it to remain at 5.5 per cent for FY24.

Additionally, ADB has revised the growth projection for Developing Asia to 4.9 per cent for the calendar year 2023, up from the earlier 4.7 per cent, attributing this change to robust domestic demand. The revision is primarily driven by upward adjustments in growth projections for China and India, although Southeast Asia's growth is expected to be slower due to downward revisions for certain countries like Malaysia, Thailand and Vietnam.

Inflation for Developing Asia is anticipated to decrease from 4.4 per cent in the previous year to 3.5 per cent in the current year, before slightly rising to 3.6 per cent in 2024.

However, the report also points out potential risks associated with prolonged higher interest rates in advanced economies, likely supply disruptions from events such as El Niño and the situation in Ukraine, which could lead to renewed challenges in energy, food security and inflation.