Chennai: The Asian Development Bank has projected India to grow by 6.7 per cent in FY25 and 6.8 per cent in FY26, taking falling inflation, monetary policy easing and improving rural income into consideration. The growth of 6.8 per cent, higher than 6.5 per cent projected by RBI, has not considered the full impact of tariff war on FY26 growth.India’s growth moderated in FY25 as industry slowed. Favourable macroeconomic policies and robust consumption demand will push growth higher during the forecast horizon, even as short-term prospects for private investment and exports are dampened by global factors.Inflation at 4.3 per cent in FY25 and 4 per cent in FY26 will moderate in line with global trends and stronger agriculture output. However, food inflation may become a challenge in the medium term as extreme weather events become more frequent or intense. Policy interventions around water, crop resilience and diversification, and expansion of processing and storage infrastructure will help mitigate volatility in food prices.Services, which accounts for 50 per cent of the GDP, saw continued robust growth at 7.3 per cent, led by financial services, real estate, professional services, public administration, defence, and other services.Going ahead, growth will be supported by more favourable monetary and fiscal policies, rising rural incomes, and moderating inflation, which will boost consumer confidence. Consumption will be a major growth driver, fuelled by rising rural incomes and increased demand from urban middle-class and affluent households thanks to reductions in personal income tax rates. Additionally, moderating inflation is expected to further boost consumer sentiment.However, net exports will be undermined by global economic uncertainty, notwithstanding robust growth in service exports. On the supply side, the outlook for services remains robust, and the manufacturing outlook will improve, helped by reduction in energy costs.Among near-term growth risks, uncertainties created by the recent increase in the US tariffs on Indian exports and broader global developments could lead to higher commodity prices. However, some of these risks are expected to be mitigated by India’s relatively stable macroeconomic position.
Source link
