ADB projects India’s GDP to grow at 7% in FY24, inflation to ease to 4.6%

The Asian Development Bank (ADB) has projected India’s GDP to grow at 7% for the fiscal year 2024 (FY24) and 7.2% in FY25 and said inflation is expected to ease in the coming times.

In its April outlook, ADB said growth will be driven primarily by robust investment demand and improving consumption demand while inflation will continue its downward trend in tandem with global trends.

“It will be driven by public and private sector investment demand and by gradual improvement in consumer demand as the rural economy improves. Exports are likely to be relatively muted in FY2024 as growth in major advanced economies slows down but will improve in FY2025,” the report said.

The report added that inflation is expected to ease to 4.6% in FY24 and 4.5% in FY25. ADB expects food inflation to moderate to 5.7% as agricultural production returns to trend in FY24.

“The inflation outlook will be helped by moderation in global inflation and a stable global crude oil market,” it said.

The report pointed out that monetary policy will become less restrictive this year as inflation nears the policy target of 4%, facilitating credit expansion. Less restrictive monetary policy and continued fiscal consolidation will pave the way for the rapid rate of increase in bank credit seen last year to continue in FY24 and FY25, notwithstanding regulatory tightening on unsecured personal loans, it said. ADB projected that credit growth will be driven mainly by loans to services, housing, and industry.

At the same time, the current account deficit is expected to widen moderately, but external financial conditions will be favourable over the forecast period. The current account deficit will widen to 1.7% of GDP in FY24 and FY25 on rising imports to meet domestic demand, the report said.

ADB, however, expects portfolio capital inflow to remain strong, attracted by the performance of India’s equity and debt markets.