India's economy is expected to grow at 7.4 per cent in the current financial year, according to Standard & Poor's and the Asian Development Bank (ADB). The latter expects growth to pick up to 7.8 per cent in 2016-17, while S&P projects growth to be higher at eight per cent.
However, risks to growth remain. In its note, ADB said: "India's economy faces further downside risks from sluggish private investment and rural demand weakened by slow wage growth and muted increase in support prices for agricultural products."
S&P warned significant reforms are needed as Indian corporates and banks are facing a weak operating environment.
Recent estimates by the Central Statistics Office show the GDP grew at 7.2 per cent in the first half of FY16. Growth in the second quarter picked up to 7.4 per cent, compared to seven per cent in the first quarter. It requires the economy to grow 7.6 per cent in the second half to expand 7.4 per cent in the entire 2015-16. Sluggish global growth is likely to drag down growth as exports are likely to suffer. India's exports have contracted 11 months in a row, weighing down growth in the first half of the current financial year.
On the demand side, ADB noted indicators such as sales of vehicles and air passenger traffic were gathering momentum.
ADB has kept its GDP growth for Asia unchanged at 5.8 per cent in 2015, and six per cent in 2016 though it marginally lowered its growth for the Central Asia and Pacific region. "Despite some softening in the prospects for the major industrial economies, developing Asia is poised to meet growth forecasts," it noted.
