ADB moderates India GDP growth hopes this year to 6.3%

Cites weak exports and erratic rains: expects rising private investment and industrial output to help economy grow 6.7% next year

Updated - September 20, 2023 07:28 pm IST

Published - September 20, 2023 07:14 pm IST - NEW DELHI 

 The Bank expects growth to be propelled by “robust domestic consumption as consumer confidence improves, and by investment including large increases” in government capital expenditure. File.

 The Bank expects growth to be propelled by “robust domestic consumption as consumer confidence improves, and by investment including large increases” in government capital expenditure. File. | Photo Credit: REUTERS

The Asian Development Bank (ADB) on September 20 pared its growth forecast for India’s economy to 6.3% for this year, from 6.4% estimated earlier, citing the impact of falling exports and erratic rainfall patterns that could hit farm output. 

The Bank’s economists also raised their inflation forecast for the year to 5.5% from 5% estimated in April and retained their real GDP growth projection for 2024-25 at 6.7%, influenced by expectations that private investment and industrial output will rise. 

Noting that the economy displayed robust growth of 7.8% in the first quarter of this fiscal year despite global uncertainties, the Bank expects growth to be propelled by “robust domestic consumption as consumer confidence improves, and by investment including large increases” in government capital expenditure through the rest of this year and next year. 

“However, as slowing exports could foment headwinds for the economy, and erratic rainfall patterns are likely to undermine agricultural output, the growth forecast for this year is revised down marginally to 6.3%,” noted the Bank’s Asian Development Outlook update.    

“Monsoon rainfall under the influence of a developing El Niño has led to erratic weather patterns, including flooding in certain regions and deficient rains, particularly in August. The erratic rainfall patterns have resulted in damage to the rice crop in particular and lower sowing for pulses in the kharif season,” the update pointed out, adding that it has slashed its farm sector growth hopes for the year by almost one percentage point.   

The ADB is upbeat on investment prospects in the economy, despite a decline in net foreign direct investment flows in the first quarter to $5 billion from $13.4 billion last year. 

Rana Hasan, the Bank’s regional economic advisor for South Asia, said that investments are currently driven in a big way by the central government’s capex push, but the latest quarter’s numbers show that States have also ramped up investments by 78%. “Moreover, signs of private capex can be gauged from the 19% growth in bank credit in the first quarter with a decline in banks’ non-performing loans, and an uptick in capacity utilisation rates in several industries with a better policy environment for manufacturing,” he said.

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