Asian Development Bank has retained India’s FY25 growth rate at 7% and FY26 growth at 7.2%. The International Monetary Fund (IMF) recently also revised its FY25 GDP growth estimate for the country from 6.8% to 7%.
In its July Asian Development report, the ADB noted that the services sector in India continued to expand robustly in Q4 of FY2023, and the forward-looking services PMI is well above its long-term average.
The industry is also expected to grow robustly, driven by manufacturing and strong demand for construction led by housing. After muted growth in FY2023, a rebound in agriculture is expected given the above-normal monsoon projections, says the report.
“This is notwithstanding the slower advance of the monsoon in June. A rebound in agriculture will be important to sustain growth momentum in rural areas,” the report said about India’s agriculture sector.
Investment demand continues to be strong, led by public investments. Bank credit is fuelling robust housing demand and improving private investment demand. However, the Manila, Philippines-based agency said India’s export growth will continue to be led by services, with merchandise exports showing relatively weaker growth.
The stronger-than-expected fiscal position of the central government could provide a further boost to growth. However, this must be weighed against downside risks arising from weather events and geopolitical shocks, noted the ADB report.
Meanwhile, ADB said that developing Asia’s growth accelerated early this year, supported by a relatively stable global economy.
The region’s economy remained robust in the first quarter (Q1) of 2024, driven by strong export growth and solid domestic demand. Inflation continued to moderate toward pre-pandemic levels, mainly due to the lagged effects of monetary policy tightening. While growth projections remain broadly unchanged, downside risks persist, including heightened geopolitical tensions, trade fragmentation, and uncertainties related to elections in major economies.
In its report, ADB noted that inflation continued to decline, although more slowly, across most of developing Asia.
“Headline inflation continued decreasing toward pre-pandemic levels, mainly due to the lagged effects of tight monetary policy and a slight easing of global food prices,” it said.