Source: ET Bureau
“The Government of India’s efforts to boost infrastructure development while undertaking fiscal consolidation and provide an enabling business environment will help in increased manufacturing competitiveness to augment exports and drive future growth,” said Mio Oka, ADB India director, noting India will retain its tag as fastest growing major economy.
Indian economy likely grew 7.6% in FY24, according to government data.
Manufacturing has driven growth in FY24, with the sector recording double-digit growth in the second and third quarter.
ADB’s upward revision follows similar revisions by other multilateral institutions and research agencies. World Bank recently raised India’s growth forecast to 6.6% from 6.4% projected earlier.
ADB also noted that strong public capex push and a pick up in private investment are likely to support growth.
“A new government initiative to support urban housing for middle-income households is expected to further spur housing growth. Private corporate investment is expected to get a boost with stable interest rates,” it said.
ADB, however, noted that inflation is likely to be higher at 4.6% in FY25 than 4.2% projected earlier. Inflation will further moderate to 4.5% in the following fiscal. The bank noted that this is likely to make monetary policy less restrictive.
Experts have been pencilling in a rate cut in the second half of 2024.
ADB noted that the government will likely keep to its path of fiscal consolidation, creating space for private borrowing.
The finance minister, in her last budget before the elections, reiterated the government’s commitment of reducing the fiscal deficit to 4.5% of the GDP by FY26. The central government had set a target of 5.1% in FY25.
