ADB raises India's GDP growth forecast to 6.7%

The Asian Development Bank (ADB) has raised its economic forecast for India to 6.7% from 6.3% following faster-than-expected expansion in July-September, driven by double-digit growth in industry.

Robust domestic demand drove higher-than-expected growth in the People's Republic of China (PRC) and India, the regional development bank says. China's economy is projected to expand by 5.2% this year, compared with a previous forecast of 4.9%, after household consumption and public investment boosted growth in the third quarter.

The upgrades for the PRC and India more than offset a lowering of the forecast for Southeast Asia, caused by lacklustre performance in the manufacturing sector, the ADB says.

"Developing Asia continues to grow at a robust pace, despite a challenging global environment," says ADB chief economist Albert Park. "Inflation in the region is also gradually coming under control. Still, risks remain, from elevated global interest rates to climate events such as El Niño. Governments in Asia and the Pacific need to remain vigilant to ensure that their economies are resilient, and that growth is sustainable," Park adds.

This comes days after the Reserve Bank of India's (RBI's) monetary policy committee increased India's gross domestic product (GDP) growth estimate for FY24 to 7% from 6.5% earlier. The October-December quarter economic growth is now at 6.5% from 6% earlier, while the January-March quarter real GDP could grow 6%, up from 5.7% projected earlier.

India's gross domestic product grew 7.6% year-on-year in the July-September quarter, higher than the RBI's forecast of 6.5%.

"Against this unsettled global economic backdrop, the Indian economy presents a picture of resilience and momentum. The real gross domestic product (GDP) growth for Q2 of the current financial year has exceeded all forecasts. The fundamentals of the Indian economy remain strong with banks and corporates showing healthier balance sheets; fiscal consolidation on course; external balance remaining eminently manageable; and forex reserves providing cushion against external shocks," RBI governor Shaktikanta Das said while reading the monetary policy statement earlier this month.

Das expects private consumption to gain support from gradual improvement in rural demand, strengthening of manufacturing activity and continued buoyancy in services. “The healthy twin balance sheets of banks and corporates, high capacity utilisation, continuing business optimism and government’s thrust on infrastructure spending should propel private sector capex. The drag from external demand is also expected to moderate with a turnaround in merchandise and services exports,” he said. “The protracted geopolitical turmoil, volatility in global financial markets and growing geo-economic fragmentations, however, pose risks to the outlook,” he added.

Real GDP growth for Q1 FY25 is projected at 6.7%; Q2 at 6.5%; and Q3 at 6.4%.