India's Growth Forecast
The Asian Development Bank (ADB) has revised India's growth forecast for the current financial year to 7.2%, up from 6.5% predicted in September. This revision is due to a stronger-than-expected performance in the second quarter, driven by robust domestic consumption.
Factors Influencing Growth
- Enhanced performance supported by GST rate cuts.
- Robust expansion in the manufacturing and services sectors on the supply side.
- Increased consumption and investment on the demand side.
Future Projections
- The growth projection for 2026-27 remains at 6.5% due to an unfavorable base effect.
- India's GDP increased to a six-quarter high of 8.2% in Q2 of 2025-26.
Challenges and Opportunities
- Growth may moderate in the second half as government capital expenditure declines.
- US tariffs are expected to soften export growth.
- Policies like labour market flexibility, GST simplification, and credit support for exporters could offset potential drags.
Global Context
- ADB raised Asia-Pacific's 2025 growth estimate to 5.1% from 4.8%.
- China’s 2025 growth forecast was upgraded to 4.8%.
- South Asia’s outlook for 2025 improved to 6.5%, reflecting India's strong domestic demand.
Risk Assessment
- Risks include trade tensions and weather shocks.
- Potential upside from successful tariff relief in US trade negotiations.
ADB emphasizes the importance of continued openness to trade and investment for sustaining growth in the region.
