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):
- 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%
- 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%
- 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
- 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
- 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