ADB cuts India's growth estimate but highlights continued resilience of services sector

The Asian Development Bank (ADB) stated today Indias growth forecast is lowered to 6.5% for FY2024 (ending 31 March 2025) and 7.0% for FY2025. The lowering of the forecast for FY2024 reflects a deceleration of growth in Q2 FY2024 to 5.4% from 8.2% in Q2 FY2023. This is on account of lower-than-expected industrial growth at 3.6% year on year, while growth in the agriculture and services sectors has remained strong at 3.5% and 7.1%, respectively. Industrial demand, on the other hand, is affected by tighter prudential norms from the central bank for unsecured personal loans and continued elevated food prices. Government capital expenditure for FY2024 also continues to lag behind the budget target, a risk highlighted in ADO September 2024. Regardless, Indias growth will remain robust, with the economy supported by higher agriculture output resulting from the summer (or kharif) crop season (which will also put downward pressure on food prices); continued resilience of the services sector; and lower-than-expected Brent crude prices in 2024 and 2025.

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