ADB lowers India's FY25 growth forecast to 6.5% from 7%
New Delhi: The Asian Development Bank (ADB) on Wednesday revised its economic growth forecast for India, lowering it to 6.5% for the current financial year, down from the earlier estimate of 7%, media reports said.
This adjustment was made due to slower-than-anticipated growth in private investment and housing demand, according to a PTI report.
Further, the bank has reduced India's growth projection for the 2025-26 financial year.
According to the latest Asian Development Outlook (ADO), changes in U.S. trade, fiscal, and immigration policies could impact growth and contribute to inflation in developing Asia and the Pacific.
The report forecasts a 4.9% growth rate for the region’s economies in 2024, slightly below the September projection of 5%.
"India's outlook is adjusted downward from 7 percent to 6.5 percent for this year, and from 7.2 percent to 7 percent next year, due to lower-than-expected growth in private investment and housing demand," the ADB stated.
Last week, the Reserve Bank of India (RBI) also reduced its growth forecast for the current fiscal year to 6.6%, down from 7.2%, and raised the inflation projection to 4.8%, citing sluggish economic activity and persistently high food prices.
India’s GDP growth slowed to a seven-quarter low of 5.4% in the July-September period of FY 2024-25, significantly below the RBI's earlier projection of 7%.
Despite the downgrade, ADB highlighted that India's growth remains robust, supported by higher agricultural output from the summer (kharif) crop, which is expected to ease food prices; the sustained strength of the services sector; and lower-than-expected Brent crude prices in 2024 and 2025.
The report also pointed to strong forward-looking indicators, including the PMI for industry and services, urban labour force participation, and the RBI’s industrial outlook, indicating that economic momentum is likely to recover in the upcoming quarters.
The growth outlook for Southeast Asia has been revised upward to 4.7% this year, compared to the previous estimate of 4.5%, driven by stronger manufacturing exports and increased public capital expenditure. The 2025 forecast for the region remains unchanged at 4.7%.
Meanwhile, the ADB has maintained its growth forecast for China at 4.8% for 2024 and 4.5% for 2025.
The report concludes that while economic growth in Asia and the Pacific is expected to remain steady this year and next, anticipated policy shifts in the U.S. under the incoming administration of President-elect Donald Trump could influence the region’s long-term economic outlook.
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