On the other hand, Asian Development Bank, or ADB, on Wednesday retained India's growth forecast for the current fiscal at 7 per cent and said that the economy is likely to pick up pace in the coming quarters on improved farm output, and higher Government spending.
According to the ADO September update, exports in the current fiscal are going to be higher than earlier projected, led by larger services exports. However, growth in merchandise exports will be relatively muted through the next fiscal.
"GDP growth is expected at 7 per cent in FY2024 (ending 31 March 2025) and 7.2 per cent in FY2025, both as forecast in ADO April 2024," the ADB said, adding that India's growth prospects remain robust.
The Indian economy grew 8.2 per cent in the last fiscal (2023-24). The RBI projects growth to be 7.2 per cent in the current fiscal.
While the GDP growth fell to 6.7 percent in the first quarter of FY2024, it is going to pick up subsequently due to improvement in agriculture and industry and services likely to be largely robust.
Private consumption will improve with improvement in rural consumption, driven by stronger agriculture and already robust urban consumption.
But even as private investments appear bright, public capital expenditure, which was hitherto at its highs, may slow down in FY2025.
According to the ADB, efforts towards bringing about fiscal consolidation are expected to bring down the deficit to a level which it last enjoyed before COVID-19-because of stronger collections for revenues as well as controlled current expenditures.
A recent policy announcement that offers employment-linked incentives to workers and firms could boost labor demand and spur job creation from FY2025, it added.
Three employment-linked incentive schemes have been announced by the Budget 2024-25 and said the government would allocate Rs 2 lakh crore to implement them.
Economic growth slowed year-on-year (yoy) in Q1 of FY2024 but is likely to pick up in the coming months with better agricultural output and higher government spending. The industry and services would continue to perform robustly, said the ADB. The current account deficit would remain moderate due to strong service exports and remittances.
That means higher food prices and, therefore higher inflation in the going fiscal compared to previous predictions. However, the same is expected to moderate in the succeeding fiscal.
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