ADB Revises India's GDP Growth Outlook Upward to 6.7%

14 Dec, 2023

ADB Revises India's GDP Growth Outlook Upward to 6.7%

The Asian Development Bank (ADB) has revised India's economic growth projection from 6.3% to 6.7%, citing a faster expansion than anticipated in July-September. This upward shift was primarily propelled by robust domestic demand, resulting in double-digit growth in the industrial sector.

According to the regional development bank, robust domestic demand also played a crucial role in driving higher-than-expected growth in both the People's Republic of China (PRC) and India. China's economy, forecasted to expand by 5.2% this year compared to the earlier prediction of 4.9%, experienced a surge in growth due to increased household consumption and public investment in the third quarter.

While the forecasts for China and India have been revised upward, Southeast Asia's projections have been adjusted downward. The lackluster performance in the manufacturing sector contributed to this revision, as stated by the ADB.

"Developing Asia is maintaining a robust growth trajectory despite a challenging global environment," highlighted ADB's chief economist, Albert Park. He emphasized the gradual containment of inflation in the region but cautioned about persisting risks, including elevated global interest rates and climate-related events like El Niño. Park stressed the necessity for governments in Asia and the Pacific to remain vigilant, ensuring economic resilience and sustainable growth.

Recent adjustments follow the Reserve Bank of India's (RBI) monetary policy committee's decision to revise India's gross domestic product (GDP) growth estimates for FY24. They raised it to 7% from the earlier forecast of 6.5%. Additionally, the economic growth forecast for the October-December quarter has been revised to 6.5%, up from the previous 6%, with a further increase to 6% in the January-March quarter.

In the July-September quarter, India's gross domestic product surged by 7.6% year-on-year, surpassing the RBI's earlier projection of 6.5%.

RBI Governor Shaktikanta Das expressed confidence in India's economy, citing resilience and momentum despite global uncertainties. He highlighted the robustness of the Indian economy, with healthier balance sheets for banks and corporates, ongoing fiscal consolidation, manageable external balance, and fortified forex reserves guarding against external shocks.

Das also anticipated a boost in private consumption driven by rural demand improvement, manufacturing activity strength, and continuous buoyancy in services. He emphasized that the combination of healthy balance sheets, high capacity utilization, business optimism, and government focus on infrastructure spending should encourage private sector capital expenditure. However, he cautioned about risks from geopolitical turmoil, volatility in global financial markets, and growing geo-economic fragmentations impacting the outlook.

The outlook for India's real GDP growth for Q1 FY25 stands at 6.7%, followed by projections of 6.5% for Q2 and 6.4% for Q3.