The Asian Development Bank (ADB) has recently announced that it will retain its forecast for India’s growth forecast at 6.4% for the current financial year, with a further projection of 6.7% for the following year. This decision comes as the ADB’s Asian Development Outlook update highlights the crucial role played by robust domestic demand in supporting the region’s recovery.
Inflation on a Declining Path
Additionally, the ADB expects inflation to continue its downward trend, gradually approaching pre-pandemic levels as fuel and food prices decline. The projected inflation rates for developing economies in Asia stand at 3.6% for this year and 3.4% for 2024.
Examining the previous fiscal year, which concluded in March 2023, the Indian economy showcased notable growth, expanding by 7.2%. Commenting on the recovery progress, ADB Chief Economist Albert Park emphasizes that Asia and the Pacific are steadily bouncing back from the pandemic. He attributes this positive trend to the driving forces of domestic demand and services activity. Moreover, many economies within the region are benefitting from a strong resurgence in tourism. However, despite these encouraging signs, the ADB acknowledges that industrial activity and exports remain weak. Furthermore, the outlook for global growth and demand in the upcoming year has actually worsened, posing additional challenges to sustaining the recovery momentum.
Earlier in April, the ADB had projected a moderation in India’s growth forecast to 6.4% for the current financial year due to tight monetary conditions and elevated oil prices. The fact that the ADB has chosen to maintain the growth forecast suggests that these factors have been carefully taken into account.
Recovery Drivers and Lingering Challenges
In essence, the ADB’s assessment underscores the paramount importance of domestic demand in ensuring the region’s ongoing recovery. However, it also sheds light on the obstacles faced by industrial sectors and exports, which still require attention and support. As the global economic landscape continues to evolve, closely monitoring the potential impacts on India’s growth trajectory becomes increasingly crucial for policymakers and stakeholders alike.