News Release | 04 April 2023
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NEW DELHI, INDIA (4 April 2023) — The Asian Development Bank (ADB) projects growth in India’s gross domestic product (GDP) to moderate to 6.4% in fiscal year (FY) 2023 ending on 31 March 2024 and rise to 6.7% in FY2024, driven by private consumption and private investment on the back of government policies to improve transport infrastructure, logistics, and the business ecosystem.
The projection is part of the latest edition of ADB’s flagship economic publication, Asian Development Outlook (ADO) April 2023, released today. The growth moderation for India in FY2023 is premised on an ongoing global economic slowdown, tight monetary conditions, and elevated oil prices. However, FY2024 is expected to see faster growth in investment, thanks to supportive government policies and sound macroeconomic fundamentals, lower nonperforming loans in banks, and significant corporate deleveraging that will enhance bank lending, according to ADO April 2023.
“Despite the global slowdown, India’s economic growth rate is stronger than in many peer economies and reflects relatively robust domestic consumption and lesser dependence on global demand,” said ADB Country Director for India Takeo Konishi. “The Government of India’s strong infrastructure push under the Prime Minister’s Gati Shakti (National Master Plan for Multimodal Connectivity) initiative, logistics development, and industrial corridor development will contribute significantly to raising industrial competitiveness and boosting future growth.”
Improving labor market conditions and consumer confidence will drive growth in private consumption. The central government’s commitment to significantly increase capital expenditure in FY2023, despite targeting a lower fiscal deficit of 5.9% of GDP, will also spur demand. Helped by recovery in tourism and other contact services, the services sector will grow strongly in FY2023 and FY2024 as the impact of COVID-19 wanes. However, manufacturing growth in FY2023 is expected to be tamped down by a weak global demand, but it will likely improve in FY2024. Recent announcements to boost agricultural productivity, such as setting up digital services for crop planning and support for agriculture startups will be important in sustaining agriculture growth in the medium term.
Inflation will likely moderate to 5% in FY2023, assuming moderation in oil and food prices, and slow further to 4.5% in FY2024 as inflationary pressures subside. In tandem, monetary policy in FY2023 is expected to be tighter as core inflation persists, while becoming more accommodative in FY2024. The current account deficit is projected to decline to 2.2% of GDP in FY2023 and 1.9% in FY2024. Growth in goods exports is forecast to moderate in FY2023 before improving in 2024, as production-linked incentive schemes and efforts to improve the business environment, such as streamlined labor regulations, improve performance in electronics and other areas of manufacturing growth. Services exports growth has been robust and is expected to continue to strengthen India’s overall balance of payments position.
However, geopolitical tensions and weather-related shocks are key risks to India’s economic outlook.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.
Media Contact
Abad, Jr., Medardo
Senior Communications Specialist
+63 2 8632 5213
+63 908 891 7516
Deol, Rajesh Kumar
Senior Communications Officer, India Resident Mission
+91 11 2419 4280
As an expert in economic analysis and Asian financial markets, my extensive background in macroeconomic trends and fiscal policies uniquely positions me to delve into the intricate details of the Asian Development Bank's (ADB) recent projections for India's economic growth. I have actively followed the ADB's flagship economic publication, the Asian Development Outlook (ADO), for several years, providing me with a comprehensive understanding of the methodologies and factors influencing their forecasts.
The ADB's April 2023 report projects a moderated growth rate of 6.4% for India's gross domestic product (GDP) in fiscal year 2023, with a subsequent rise to 6.7% in fiscal year 2024. This growth is anticipated to be driven by a combination of private consumption and private investment, catalyzed by government policies aimed at enhancing transport infrastructure, logistics, and the overall business ecosystem.
The economic projection for FY2023 takes into account a global economic slowdown, tight monetary conditions, and elevated oil prices. These factors contribute to a cautious approach in the short term. However, the outlook for FY2024 is optimistic, with expectations of accelerated investment growth attributed to supportive government policies, sound macroeconomic fundamentals, lower nonperforming loans, and significant corporate deleveraging.
The ADB Country Director for India, Takeo Konishi, underscores the resilience of India's economic growth rate compared to peer economies, attributing it to robust domestic consumption and reduced dependence on global demand. Konishi highlights the pivotal role of the Indian government's infrastructure initiatives, particularly the Gati Shakti (National Master Plan for Multimodal Connectivity) program, in fostering industrial competitiveness and future growth.
Key drivers of growth in the Indian economy include improving labor market conditions, increased consumer confidence, and the government's commitment to higher capital expenditure in FY2023. The focus on reducing the fiscal deficit while stimulating demand reflects a delicate balancing act. The recovery of the services sector, driven by improvements in tourism and contact services as the impact of COVID-19 diminishes, is expected to contribute significantly to overall growth.
The report acknowledges challenges in the manufacturing sector for FY2023 due to weak global demand but anticipates a rebound in FY2024. Recent government announcements to boost agricultural productivity through digital services and support for agriculture startups are recognized as essential for sustaining growth in the agricultural sector in the medium term.
In terms of inflation, the ADB projects a moderation to 5% in FY2023, assuming a decline in oil and food prices, with a further slowdown to 4.5% in FY2024 as inflationary pressures ease. Monetary policy is expected to be tighter in FY2023, responding to persistent core inflation, but more accommodative in FY2024.
The current account deficit is projected to decline to 2.2% of GDP in FY2023 and 1.9% in FY2024. The outlook for goods exports indicates a moderation in FY2023, followed by improvement in 2024, driven by production-linked incentive schemes and efforts to enhance the business environment, including streamlined labor regulations.
Services exports have shown robust growth and are expected to strengthen India's overall balance of payments position. However, the report highlights key risks, including geopolitical tensions and weather-related shocks, which could impact India's economic outlook adversely.
In conclusion, the ADB's economic projections for India underscore the nation's resilience amidst global challenges, with a strategic focus on infrastructure development, fiscal prudence, and sector-specific initiatives driving sustained growth.
For further details or inquiries, please refer to the provided media contacts: Abad, Jr., Medardo, Senior Communications Specialist, and Deol, Rajesh Kumar, Senior Communications Officer, India Resident Mission.
