Asian Development Bank Forecasts India’s Economic Growth and Inflation Trends

Asian Development Bank Forecasts India’s Economic Growth and Inflation Trends

The Asian Development Bank (ADB) released its Asia Development Outlook report, forecasting India’s economic performance over the next two years.

Growth Forecast

  • India’s GDP growth is expected to slow from 7.6% in 2023-24 to 7% in the current year before improving to 7.2% in 2025-26.
  • India remains the fastest-growing sub-region in South Asia, accounting for 80% of its GDP.

Inflation Outlook

  • Retail inflation is expected to ease to 4.6% in the current year and 4.5% in 2025-26.
  • Food inflation is projected to drop to 5.7% due to a normal monsoon and improved farm output.

Rural Consumption and Monsoon Impact

  • A normal monsoon is expected to revive rural consumption, which was subdued due to erratic rainfall last year.
  • Greater demand for work under the Mahatma Gandhi National Rural Employment Guarantee Act indicates stress in the farm sector.

Urban Consumer Confidence

  • Higher incomes will drive consumer demand, particularly in urban areas where confidence levels have improved.
  • Falling inflation and a gradual improvement in cities’ labor markets will further boost urban demand.

Current Account Deficit and Imports

  • Imports to meet domestic demand may widen the Current Account Deficit moderately to 1.7% of GDP in the current and next year.

Investment and Export Outlook

  • India’s growth will be driven by public and private sector investment demand and gradual improvement in consumer demand.
  • Exports are expected to be relatively muted this year due to slowing growth in major advanced economies but will improve in 2025-26.
  • Foreign direct investment (FDI) inflow is expected to remain muted in the near term but pick up in 2025-26, particularly in industry and infrastructure sectors.

Risks to Outlook

  • Global shocks such as a spike in crude oil prices could pose downside risks to India’s economic outlook.
  • Domestic risks include underperformance in agriculture due to weather shocks affecting demand and inflation.

Multiple-Choice Questions (MCQs):

  1. What is the forecasted GDP growth rate for India in 2025-26 according to the ADB report?
    • A) 7.6%
    • B) 7.2%
    • C) 6.3%
    • D) 6.6%
    • Answer: B) 7.2%
  2. What is the projected retail inflation rate for India in the current year, as per the ADB report?
    • A) 4.6%
    • B) 5.7%
    • C) 7.6%
    • D) 4.5%
    • Answer: A) 4.6%
  3. What factor is expected to revive rural consumption in India, as mentioned in the report?
    • A) Higher incomes in rural areas
    • B) Decrease in urban consumer confidence
    • C) Normal monsoon
    • D) Increase in food inflation
    • Answer: C) Normal monsoon
  4. What is expected to drive India’s growth, according to the ADB report?
    • A) Decreased investment demand
    • B) Sluggish consumer demand
    • C) Public and private sector investment demand
    • D) Decline in urban consumer confidence
    • Answer: C) Public and private sector investment demand
  5. What is cited as a potential downside risk to India’s economic outlook in the ADB report?
    • A) Surge in crude oil prices
    • B) Decline in global inflation
    • C) Decrease in agricultural output
    • D) Increase in FDI inflow
    • Answer: A) Surge in crude oil prices