India’s GDP growth to fall short of predictions at 6.3%
A leading financial institution has lowered India’s gross domestic product (GDP) projection by one percentage point for the fiscal year 2022-2023 to 6.3% from 6.4%. However, the Asian Development Bank (ADB) has kept its GDP projection for the current fiscal year (2023-2024) at 6.7%, with rising private investment and industrial output expected to drive growth.
In its Asian Development Outlook September 2023, ADB said growth for the rest of this fiscal year and next will be driven by growing domestic consumption as consumer confidence improves, and by big increases in government capital expenditure.
The Outlook said: “As slowing exports could foment headwinds for the economy, and erratic rainfall patterns are likely to undermine agricultural output, the growth forecast for FY2023 is revised down marginally to 6.3%.”
It added that risks to growth could arise from global geopolitical tensions, which may further create economic uncertainty and lead to a rise in global food prices, ADB said.
ADB’s report said that economic growth could be higher in FY25 than expected if foreign direct investment inflows increase, particularly in the manufacturing sector, as multinational corporations diversify their supply chains by including India as a production location.
India’s GDP grew by 7.8% year-on-year in the first quarter of the current financial year, reflecting strong growth in services and rising investment fuelled by public investment and bank credit to the private sector.
Inflation falls
The ADB report confirmed that inflation had fallen from 6.7% in 2022 to 5.5% in 2023. “Inflation has moderated broadly, but the forecast for FY2023 (2023-24) is raised owing to a spike in food prices, and the forecast for FY2024 (2024-25) is marginally lowered as core inflation moderates,” the Outlook said.
The forecast is higher than the bank’s April 2023 estimate because of unexpectedly high food prices, it said, adding that inflation is expected to moderate to 4.2% in FY2024, slightly lower than previously forecast, due to core inflation falling.
ADB also lowered its economic growth forecast for developing Asian countries to 4.7% this year, which is lower than the 4.8% expansion the bank had forecast in April, according to ADB. Growth in China will likely come in at 4.9% this year, marginally down on the 5% cent seen previously.
‘’Domestic demand is continuing to support developing Asia’s growth. The reopening of the People’s Republic of China, rebounding tourism, resilient service sectors, healthy money transfers into the region, and stable financial conditions are all helping support economic activity,” said ADB.
“Developing Asia continues growing robustly, and inflation pressures are receding,” ADB Chief Economist Albert Park said. “Some central banks in the region have started to lower interest rates, which will help boost growth.”
Meanwhile, Prime Minister Narendra Modi has reiterated the government’s aim is to make India “a global growth engine and that the country will soon emerge as an economic powerhouse of the world”.
Speaking at an event to mark the completion of 20 years of the Vibrant Gujarat Summit, Modi said they sowed small seeds of a ‘Vibrant Gujarat’ 20 years ago that has developed into a big tree.
“We organised Vibrant Gujarat to make the state a growth engine of India. After 2014, our aim has been to make India a global growth engine, he said addressing a gathering of industrialists and businessmen.
“We are standing at such a phase that India will soon emerge as a global economic powerhouse,” he said.
“It is my guarantee to you that in a few years from now, in front of your eyes, India will be among the top three economies of the world,” the PM said.
