India’s economy will grow 6.4 per cent this year and 6.7 per cent the year after, says the Asian Development Bank.
The ADB growth forecast in India’s GDP will be driven by private consumption and private investment on the back of government policies to improve transport infrastructure, logistics, and the business ecosystem.
The projection is part of the latest edition of ADB’s flagship economic publication, Asian Development Outlook (ADO) April 2023, released on Tuesday.
India economic growth
The growth moderation for India in 2023 is premised on an ongoing global economic slowdown, tight monetary conditions, and elevated oil prices.
However, 2024 is expected to see faster growth in investment, thanks to supportive government policies and sound macroeconomic fundamentals, lower non-performing loans in banks, and significant corporate deleveraging that will enhance bank lending, according to ADO April 2023.
Takeo Konishi, ADB Country Director for India, said: “Despite the global slowdown, India’s economic growth rate is stronger than in many peer economies and reflects relatively robust domestic consumption and lesser dependence on global demand.
“The Government of India’s strong infrastructure push under the Prime Minister’s Gati Shakti (National Master Plan for Multimodal Connectivity) initiative, logistics development, and industrial corridor development will contribute significantly to raising industrial competitiveness and boosting future growth.”
Improving labour market conditions and consumer confidence will drive growth in private consumption.
The central government’s commitment to significantly increase capital expenditure in 2023, despite targeting a lower fiscal deficit of 5.9 percent of GDP, will also spur demand.
Helped by recovery in tourism and other contact services, the services sector will grow strongly in 2023 and 2024 as the impact of COVID-19 wanes.
However, manufacturing growth in 2023 is expected to be tamped down by a weak global demand, but it will likely improve in 2024. Recent announcements to boost agricultural productivity, such as setting up digital services for crop planning and support for agriculture startups will be important in sustaining agriculture growth in the medium term.
Inflation will likely moderate to 5 per cent in 2023, assuming moderation in oil and food prices, and slow further to 4.5 per cent in 2024 as inflationary pressures subside.
In tandem, monetary policy in 2023 is expected to be tighter as core inflation persists, while becoming more accommodative in 2024.
The current account deficit is projected to decline to 2.2 per cent of GDP in 2023 and 1.9 per cent in 2024. Growth in goods exports is forecast to moderate in 2023 before improving in 2024, as production-linked incentive schemes and efforts to improve the business environment, such as streamlined labour regulations, improve performance in electronics and other areas of manufacturing growth.
Services export growth has been robust and is expected to continue to strengthen India’s overall balance of payments position.
However, geopolitical tensions and weather-related shocks are key risks to India’s economic outlook, said the report.
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