ADB retains India growth forecast at 7% for FY25, 7.2% for FY26

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

“Agricultural improvements will enhance rural spending, which will complement the effects of robust performance of the industry and services sectors,” he said.

The report highlights that an above-average monsoon in most parts of the country will lead to strong agricultural growth, enhancing the rural economy in FY25.

It maintains a positive outlook for the industry and services sectors, private investment and urban consumption for FY25 and FY26. Additionally, a new government policy offering employment-linked incentives to workers and firms could increase labour demand and support job creation starting in FY26.

With the government’s fiscal consolidation efforts, central government debt is projected to decrease from 58.2 per cent of GDP in FY24 to 56.8 per cent in FY25, ADB said in the report. The general government deficit, which includes state governments, is expected to fall below 8 per cent of GDP in FY25.

Consumer inflation is anticipated to rise to 4.7 per cent in FY25 due to elevated food prices, despite higher agriculture output expectations. This has prevented India’s central bank from adopting a more accommodative monetary policy.

If improved agricultural supply leads to moderating food price increases, the central bank may begin lowering policy rates in FY25, enhancing prospects for credit expansion, it noted.

India’s current account deficit is forecast to be 1.0 per cent of GDP in FY25 and 1.2 per cent in FY26, down from the previous forecast of 1.7 per cent for both years, due to better exports, lower imports and strong remittance inflows, ADB said.

Near-term growth risks include geopolitical shocks that could disrupt global supply chains and commodity prices, as well as weather-related risks to agricultural output.

These risks may be offset by higher foreign direct investment, which could support growth and investment, particularly in manufacturing. Additionally, improvements in the supply of agricultural products may reduce food prices, potentially lowering consumer inflation below the forecast.

Fibre2Fashion News Desk (DS)