ADB raises India FY24 growth forecast to 6.7%, cites industry performance

China in 2024 is expected to slow down to 4.5%, says lender in report raising estimate for Developing Asia

India’s economy would grow 6.7 per cent in Financial Year 2023-24 (FY24), said Asian Development Bank (ADB) on Wednesday, raising the estimate from 6.3 per cent it made in September.

The lender revised its estimate based on India’s higher-than-expected gross domestic product (GDP) growth, of 7.6 per cent, in the second quarter of FY24. “Economic data also indicate the industrial sector in particular, including manufacturing, mining, construction, and utilities, grew by double digits. For FY2024 as a whole, agriculture is expected to grow slightly slower than expected, but this will be more than offset by industry’s much stronger-than-expected growth, hence the upward revision,” it said in a report.

ADB’s growth forecast for FY25 is unchanged at 6.7 per cent.

Fixed investments – driven by increased capital spending by the central and state governments – will compensate for lower growth in private consumption expenditure and weaker-than-expected exports in FY24.

ADB kept its earlier forecasts on Indian inflation unchanged, 5.5 per cent in FY24.

About growth in Developing Asia, which excludes China, ADB said the outlook is upbeat despite global challenges. It revised the region’s growth projection to 4.9 per for calendar year 2023 per cent from 4.7 per cent earlier, citing robust domestic demand. It maintained the forecast for 2024, at 4.8 per cent.

“The revision to the region’s 2023 growth projection is driven by an upward adjustment to China's and India’s growth projections,” said the report.

ADB projected growth in China to reach 5.2 per cent in 2023, an increase from the forecast of 4.9 per cent in September. China in 2024 is expected to slow down to 4.5 per cent.

Inflation in Developing Asia is forecast to decline from 4.4 per cent last year to a downward-adjusted 3.5 per cent this year, before rising slightly to 3.6 per cent in 2024.

“Downside risks are mainly associated with higher-for-longer interest rates in advanced economies, which could trigger financial instability. Possible supply disruptions from El Niño and the Russian invasion of Ukraine could renew energy and food security challenges, and rekindle inflation,” said ADB.

After numbers about the economy’s performance in the second quarter came out on November 30, several economists sharply raised their full-year growth projections.

The Reserve Bank of India, in its post monetary policy statement, raised its growth estimate for FY24 to 7 per cent from 6.5 per cent, although it retained its inflation forecast at 5.4 per cent.

Similarly, Morgan Stanley predicted the Indian economy to grow by 6.9 per cent in the current fiscal year and Kotak Mahindra Bank revised its estimate to 6.8 per cent. The two had projected the economy to grow 6.4 per cent and 6.2 per cent, respectively.

Nomura Asia revised its full financial-year forecast to 6.7 per cent from 5.9 per cent earlier and maintained its projection of 5.6 per cent for FY25, citing a slowdown in public capex ahead of elections and sluggishness in rural demand and private capex.