ADB sees India growing at 7% this fiscal

India will grow at 7% in the current fiscal before accelerating to 7.2% in FY26, driven by robust investment and consumption demand, the Asian Development Bank (ADB) said this week.

Inflation may ease to 4.6% in FY25 and further to 4.5% in FY26, while food inflation may moderate to 5.7% as agriculture production is expected to improve.

The inflation outlook will be helped by a moderation in global inflation and a stable global crude oil market, ADB said.

India’s economy grew 7.6% last fiscal, driven by gains in the manufacturing, construction, and services sectors, despite declining agricultural production due to erratic rains.

The ADB report said the decrease in rural consumption was compensated by an 8.5% growth in the manufacturing sector.

The construction sector also saw 10.5% growth, and the services sector, which constitutes 50% of gross domestic product (GDP), grew by 7.5%.

Net direct taxes also boosted growth last fiscal year on declining central government subsidy expenditure following high fertilizer subsidies in the previous fiscal year.

Consumer confidence has improved in urban areas, ADB said. Urban consumption is expected to jump this fiscal, supported by falling inflation and a gradual improvement in the urban labor market.

Rural consumption was muted last fiscal as incomes tanked on erratic rainfall affecting agriculture, as indicated by greater demand for work under the Mahatma Gandhi National Rural Employment Guarantee Scheme.

Assuming average monsoon rainfall, rural consumption will improve in the current fiscal, ADB said.

The report warned that net exports will continue its downward trajectory but will improve in the next year.

India’s share in global goods exports has remained stable in recent years.

This fiscal, goods exports will be depressed as advanced economies slow down, but they will improve somewhat in the next fiscal as global growth improves.

ADB said export performance of electronics continues to be strong, driven by increasing foreign investment in the industry.