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Wednesday, May 22, 2024

Asian Development Bank raises Indian growth projection

The institution expects GDP to grow 7% compared to the previous estimate of 6.7%

The Asian Development Bank (ADB) has raised India’s GDP forecast from 6.7% to 7% for the current fiscal year. The South Asian country will remain a major growth engine in the Asia-Pacific region, the ADB predicts.

India’s GDP will grow 7.2% during the next financial year (2025-26), the Manila-headquartered ADB added. According to the bank, India’s growth will be boosted by “strong investment, recovering consumption, and improving exports.” In the April edition of the bank’s ‘Asia’s Economic Development’ series, it also predicted that stronger growth in South and Southeast Asia will offset slower growth in other sub-regions of the continent.

The ADB’s revised analytics were released days after a Bloomberg Economics analysis said that India could claim the title of number-one contributor to global growth in purchasing power parity (PPP) by 2028.

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Shoppers buy decorative items ahead of the Hindu festival of 'Diwali' at a market area in Amritsar on October 21, 2022.
India’s central bank reveals growth prediction

In Bloomberg Economics’ base case scenario, Indian growth could accelerate to 9% by the end of the decade from the estimated 7.6% during the fiscal year that ended on March 31. Among the country’s booming sectors are electronics manufacturing and aviation.

India’s large and young population is expected to contribute to the growth. India recorded 8.4% GDP growth in the third quarter of financial year 2023-24 (October to December), up from growth of 7.6% in the period of June to September. Meanwhile, New Delhi raised its GDP growth outlook for fiscal year 2023-24 from 7.3% to 7.6%.

In 2022, India overtook the UK to become the world’s fifth-largest economy. Prime Minister Narendra Modi’s government is targeting 2027 to take the country to the $5 trillion mark, making it the third-largest economy. Earlier this year, the Finance Ministry said that by 2030, India could reach $7 trillion on the back of continued reforms. The US, with a GDP of $25.44 trillion, is by far the world’s largest economy as of 2022. It is followed by China, Japan, and Germany.


READ MORE: Parachute Economics: Why claims that India’s growth is hyped are at odds with the evidence

Raghuram Rajan, a renowned economist who served as former governor of India’s central bank and who also worked at the IMF, recently criticized “the hype” created around India’s growth. In an interview with Bloomberg, he said India must improve its structural problems, including poor education and workforce skills, to meet its true potential.

He quickly came under fire from other Indian economists and officials, including a member of NITI – a government policy think tank – Aayog Arvind Virmani, who said Rajan sounds like a “parachute economist” disconnected from the realities on the ground.

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