The Asian Development Bank (ADB) has raised India’s growth forecast to 6.7 per cent for the current financial year 2023-24 from its earlier projection of 6.3 per cent on account of higher-than-expected second-quarter numbers, according to the ‘Asian Development Outlook December 2023’ released on Wednesday.
The second quarter of FY24 saw higher-than-expected GDP growth of 7.6 per cent, causing growth in the first half (April-September) to expand by a strong 7.7 per cent.
The ADB said economic data also indicate that the industrial sector in particular, including manufacturing, mining, construction, and utilities, grew by double digits.
“For FY24 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.
On the demand side, it said, higher growth in fixed investment driven by increased capital spending by the central government and state governments will compensate for lower growth in private consumption expenditure and weaker-than-expected exports. Last week, the Reserve Bank also increased its growth estimate for FY24 to 7 per cent from its earlier projection of 6.5 per cent.
The September Asian Development Outlook had projected a GDP growth of 6.3 per cent for FY24. For the next financial year, FY25, the Manila-based multilateral funding agency has kept its growth forecast unchanged at 6.7 per cent.
The report said India’s growth also accelerated to 7.1 per cent in the first three quarters of the calendar year, driven by strong industrial production and investment. The boost from post-pandemic reopening in most Southeast Asian economies is waning, and merchandise goods exports from high-income technology exporters remain subdued, although they have stabilised, it said.
With regard to inflation, the report retained it at 5.5 per cent for the current financial year. The RBI has also retained its inflation forecast at 5.4 per cent for FY24.
India’s inflation forecasts for 2023 and 2024 are in line with recent data and are still within expectations, the report said.
Last week, the RBI also raised its real GDP growth forecast for 2023-24 to 7 per cent, as against 6.5 per cent estimated earlier. “Economic activity exhibited buoyancy in Q2 aided by strong domestic demand. GDP posted a robust growth of 7.6 per cent in Q2:2023-24, driven by investment and government consumption,” RBI Governor Shaktikanta Das said during the bimonthly monetary policy review.
Q3 GDP growth is expected at 6.5 per cent; and Q4 at 6.0 per cent. Real GDP growth for Q1:2024-25 is projected at 6.7 per cent; Q2 at 6.5 per cent; and Q3 at 6.4 per cent, according to the RBI.
(With Inputs from Agencies)
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