India's GDP to grow by 7.5% in FY22 & 8% in FY23: ADB

The outlook assumes sustained progress in COVID-19 vaccinations and that any new variants of the virus are of limited severity. It also factors in the impacts of Russia’s invasion of Ukraine—primarily higher global oil and commodity prices that will contribute to rising inflation and a widening of the current account deficit. The forecast was issued as part of the Asian Development Outlook (ADO) 2022. FY22 refers to the 12 months ending 31 March 2023.

“The Government of India’s policy to improve logistics infrastructure, incentives to facilitate industrial production, and measures to improve farmers’ income will support the country’s accelerated recovery,” said ADB country director for India Takeo Konishi.

Risks to the outlook include uncertain global economic conditions, potential new surges in COVID-19 cases, and sharp rises in commodity prices.

Large public infrastructure investments planned over the next 2 years will encourage more private investment. Together with the PM Gati Shakti initiative to improve India’s logistics infrastructure, increased financial and technical support to states to expand capital investment will boost infrastructure spending and help spur economic growth. Private consumption will pick up as labour market conditions improve. The government’s production-linked incentive scheme will provide a thrust to the manufacturing sector in FY22 and FY23, ADB said.

Inflation will likely increase to 5.8 per cent in FY22 amid rising oil prices. While monetary policy will remain accommodative, the central bank may hike policy rates in the later part of the fiscal due to tightening of the United States federal funds rate and elevated oil prices. The current account deficit is projected to widen to 2.8 per cent of gross domestic product in FY22 due to the rising oil import bill, and is expected to decline to 1.9 per cent in FY23 amid an uptick in export growth. Foreign direct investment inflow is expected to moderate amid rising global uncertainty and tightening of global economic and financial conditions.

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