Rama Krishna Sangem
In a good news to stock markets, the Asian Development Bank (ADB) on April 11, Thursday upgraded India’s gross domestic product growth forecast for Financial Year 2024-25 (FY25) to 7 per cent from 6.7 per cent earlier, citing robust public and private investments and strong services sector.
However, it said unanticipated global events such as supply line disruptions to crude oil markets and weather shocks to agriculture are key risks to India’s economic outlook.
The forecast is part of the lender’s flagship economic publication, ‘Asian Development Outlook (ADO) April 2024’. “The triggers for growth in FY25 will come from higher capital expenditure on infrastructure development both by central and state governments, rise in private corporate investment, strong service sector performance and improved consumer confidence.
Growth momentum will pick up in FY26, backed by improved goods exports and an increase in manufacturing productivity and agricultural output,” ADB said.
Strong domestic demand
Mio Oka, ADB Country Director for India, said notwithstanding global headwinds, the country remains the fastest growing major economy on the strength of its strong domestic demand and supportive policies. “The Government of India’s efforts to boost infrastructure development while undertaking fiscal consolidation and provide an enabling business environment will help in increased manufacturing competitiveness to augment exports and drive future growth.”
ADB said a 17 per cent rise in central government capital expenditure in FY25, compared to the previous financial year, together with transfers to state governments will boost infrastructure investment. “A new government initiative to support urban housing for middle-income households is expected to further spur housing growth.
Private corporate investment is expected to get a boost with stable interest rates. With inflation moderating to 4.6 per cent in FY25 and easing further to 4.5 per cent in FY26, monetary policy may become less restrictive, which will facilitate rapid offtake of bank credit. Demand for financial, real estate and professional services will grow while manufacturing will benefit from muted input cost pressures that will boost industry sentiment. Expectations of a normal monsoon will help boost growth of the agriculture sector.”
