ADB increases the growth rate forecast for India to 7% for FY 25

The Asian Development Bank's (ADB) latest Asian Development Outlook for April 2024, released on 11 April 2024, has upgraded India’s gross domestic product (GDP) growth forecast for 2024-25 (FY25) to 7 percent from 6.7 per cent earlier. According to the ADB report the Indian economy grew by 7.6% in 2023-24, and in 2025-26 its growth rate is expected to be 7.2%.

The Reserve Bank of India, in its recent bi-monthly monetary policy, also forecasted a 7% growth rate for the Indian economy in FY25(2024-25).

According to the ADB, despite global economic problems, India is expected to be the fastest-growing major economy in the world in FY 2025 due to its strong domestic demand and supportive government policies. The ADB report expects India to be a major growth engine within Asia, driven by strong investment, recovering consumption, and gains in electronics and services exports. 

Reason for Upgradation of Indian Growth Rate by ADB

The ADB has mentioned several factors that could lead to a higher growth rate of the Indian economy in 2024-25. Some of these are : 

Higher capital expenditure by the government 

According to the ADB, the central government capital expenditure will increase by 17% in 2024-25 compared to 2023-24. The transfer of funds from the central government to the state government for capital expenditure will likely boost the country's infrastructure sector. Infrastructure growth has a multiplier effect on the economy, and it gives to the Indian economy.

Boost to the Housing sector 

The central government initiative to push urban housing for middle-income households will boost the housing sector.

Stable and low inflation 

The ADB report expects a moderate inflation rate of 4.6% in FY 25, which is further expected to drop to 4.5% in 2025-26. This will lead to an easy monetary policy by the RBI. The interest rate is expected to be stable, enabling higher lending by banks to the companies. It will boost private sector investment in the economy, and they will get loans at cheaper rates.

It will also boost the manufacturing sector's competitiveness and increase exports from the sector.

Threat to Indian economy 

The ADB expects that unanticipated global shocks, such as supply line disruptions to crude oil markets and weather shocks that impact agriculture output, are key risks to India’s economic growth.

Growth Rate in Asia and China 

The ADB has forecasted that Asia will grow by 4.9% in 2024 and 2025(Jan to December ). China’s economy is expected to slow from a 5.2% growth rate in 2023 to 4.8% in 2024  and 4.5% in 2025.

India is expected to be a major growth engine within Asia, driven by strong investment, recovering consumption, and gains in electronics and services exports. 

Asian Development Bank (ADB) is a regional multilateral development bank focusing on the Asia Pacific region. It was set in 1966.

Headquarters: Mandaluyong City, Manila, Philippines

President: Masatsugu Asakawa (Japan)

Members countries: 68

Expected Growth rate of the Indian economy in 2023-24/2024-25

Following are the forecasts of various global and Indian financial agencies (as of 12 April 2024)