Winning Bizness Economic Desk

Mumbai. The Asian Development Bank (ADB) has revised its projections for India’s economic growth, citing weaker-than-expected private investment and housing demand. According to the latest Asian Development Outlook (ADO) report released on Wednesday, India’s GDP growth for the current fiscal year is now estimated at 6.5%, down from the earlier forecast of 7%. ADB has also adjusted its growth forecast for the financial year 2025-26, lowering it from 7.2% to 7%. This comes after the Reserve Bank of India (RBI) recently reduced its own growth forecast for the ongoing fiscal year to 6.6%, signaling concerns about economic activity and inflationary pressures.

Despite these downward revisions, some institutions remain optimistic about India’s long-term growth trajectory, emphasizing the country’s structural strengths and potential to recover from temporary slowdowns.

Challenges for Developing Asia and India

The ADO report highlights broader economic headwinds for the developing Asia-Pacific region, stemming from shifts in U.S. trade, fiscal, and immigration policies. These changes could dampen growth and elevate inflation across the region. For 2024, ADB now expects the Asia-Pacific economies to grow at 4.9%, slightly lower than the earlier estimate of 5%. The report underscores that while regional economies are showing resilience, they remain vulnerable to global economic uncertainties. India, as a key player in the region, faces its own set of challenges. The slowdown in private investment and reduced demand for housing are the primary reasons for the trimmed growth projections. These factors are compounded by inflationary pressures, driven by rising food prices and sluggish economic activity.

RBI’s Stricter Stance on Inflation and Growth

Last week, the RBI also adjusted its growth and inflation forecasts. The central bank reduced the GDP growth projection for the current fiscal year from 7.2% to 6.6%. Additionally, the inflation forecast was raised to 4.8%, reflecting concerns about the impact of rising food prices and broader economic conditions. India’s GDP growth had already hit a seven-quarter low of 5.4% in the July-September quarter of 2024-25, significantly below earlier expectations.

The Road Ahead

The downward revisions in GDP growth forecasts underscore the need for targeted measures to revive private investment and bolster demand in critical sectors like housing. While India’s economy remains resilient compared to many global counterparts, addressing these short-term challenges is crucial to sustain its growth momentum. As India navigates these hurdles, its ability to adapt to global and domestic economic changes will determine its trajectory in the coming years.