The Asian Development Bank (ADB) has reduced its GDP forecast for India for the fiscal year 2023-2024 by one percentage point, bringing it down from 6.4 percent to 6.3 percent. This downward revision is attributed to a slowdown in exports and potential disruptions in agricultural output due to unpredictable rainfall patterns.
The GDP forecast for the fiscal year 2024-2025 remains unchanged at 6.7 percent, as it is anticipated that growth will be fueled by increased private investment and industrial production.
“As slowing exports could foment headwinds for the economy, and erratic rainfall patterns are likely to undermine agricultural output, the growth forecast for FY2023 is revised down marginally to 6.3 per cent,” ADB said.
The Asian Development Bank (ADB) has pointed out potential risks and opportunities in India’s economic outlook. On the downside, these risks include global geopolitical tensions, which could create economic uncertainty and potentially lead to a rapid increase in global food prices. Additionally, adverse weather events during the kharif season (July-October) or the Rabi season (October-April) could further impact agricultural growth.
Conversely, the ADB suggests that economic growth in FY25 could surpass expectations if there are larger inflows of foreign direct investment (FDI), especially in the manufacturing sector. This could occur as multinational corporations seek to diversify their supply chains by including India as a production location.
In the first quarter of the current fiscal year, India’s GDP expanded by 7.8 percent year-on-year, primarily driven by solid growth in the services sector and increased investment fueled by public investment and bank credit to the private sector.
According to the ADB report, inflation has decreased from 6.7 percent in 2022 to 5.5 percent in 2023. However, the inflation forecast for FY2023 (2023-24) has been revised upward due to a surge in food prices, while the projection for FY2024 (2024-25) has been marginally lowered as core inflation slows down.
This forecast is higher than what the bank anticipated in its April 2023 estimate, primarily because of unexpectedly high food prices. The report further mentions that inflation is expected to moderate to 4.2 percent in FY2024, slightly lower than the previous forecast, mainly because core inflation is expected to be less pronounced.
This prediction considers the impact of several government policy measures aimed at mitigating inflation. These measures include restrictions on the export of non-basmati rice, the imposition of export tariffs on other rice varieties, the stockpiling of pulses and onions, the elimination of import duties on pulses, and the introduction of a new subsidy for cooking gas used for cooking.
Lower GDP projection for Asia
The Asian Development Bank (ADB) has revised its economic growth projection for developing Asia down to 4.7 percent for this year, which is a slight decrease from the 4.8 percent growth forecast in April, as reported by the ADB. Furthermore, China’s growth is expected to be around 4.9 percent this year, which is a bit slower than the previous estimate of 5 percent.
“Domestic demand is continuing to support developing Asia’s growth. The reopening of the People’s Republic of China, rebounding tourism, resilient service sectors, healthy money transfers into the region, and stable financial conditions are all helping support economic activity,” said ADB on Asia’s economic outlook.
ADB cited three primary risks to the outlook mentioned above — the impact of the weakness in China’s property sector, sporadic supply disruptions from Russia’s invasion of Ukraine and export curbs amid the risk of droughts and floods caused by El Nino.
