ADB retains India's growth forecast at 7% for FY'25

New Delhi: The Asian Development Bank Wednesday retained India's gross domestic product (GDP) growth forecast for FY25 at 7%, as projected in its April outlook.

Robust growth in industry driven by manufacturing and strong demand for construction led by housing and stronger-than-expected fiscal position of the central government could provide a further boost to growth, it said. The bank also retained the inflation forecast at 4.6% for the year. ADB cautioned that the growth forecast must be weighed against downside risks arising from weather events and geopolitical shocks.

The International Monetary Fund had on Tuesday revised upwards India's growth forecast for FY25 to 7% from 6.8% projected in April, led by improved prospects for private consumption, particularly in rural areas. India's economy grew 8.2% in FY24. The Manila-based ADB expects services to grow more than merchandise in FY25. Industry is also expected to grow robustly, driven by manufacturing and strong demand for construction led by housing, it said.

"After muted growth in FY24, a rebound in agriculture is expected given the above-normal monsoon projections. This is notwithstanding the slower advance of the monsoon in June," ADB said.

It noted that investment demand continues to be strong, led by public investments and bank credit is fuelling robust housing demand and improving private investment demand. However, it said, export growth will continue to be led by services, with merchandise exports showing relatively weaker growth.

On the inflation front, ADB projected a decline to 4.5% next fiscal. India's retail inflation rose to a four-month high of 5.08% in June from 4.8% in May with food inflation flaring up to a six-month high of 9.36%.

ADB also upped the forecast for Asia to 5% from 4.9% projected in April as most of Asia and the Pacific is seeing faster economic growth compared with the second half of last year.