The ADB’s growth forecast for India for FY25 is in line with the projections made by the Reserve Bank of India.
| Photo Credit: REUTERS

The Asian Development Bank (ADB) on Thursday raised India’s GDP growth forecast for the current fiscal to 7 per cent from 6.7 per cent earlier, saying the robust growth will be driven by public and private sector investment demand and gradual improvement in consumer demand.

The 2024-25 growth estimate is, however, lower than 7.6 per cent projected for the 2022-23 fiscal. Strong investment drove GDP growth in the 2022-23 fiscal as consumption was muted, the ADB said.

The ADB had in December last year projected the Indian economy to expand 6.7 per cent in the 2024-25 fiscal.

“The economy grew robustly in fiscal 2023 with strong momentum in manufacturing and services. It will continue to grow rapidly over the forecast horizon. Growth will be driven primarily by robust investment demand and improving consumption demand. Inflation will continue its downward trend in tandem with global trends,” said the April edition of the Asian Development Outlook released on Friday.

Growth will be robust despite moderating in FY2024 and FY2025, it said. For the 2025-26 fiscal, the ADB has projected India’s growth at 7.2 per cent.

The ADB said exports are likely to be relatively muted this fiscal as growth in major advanced economies slows down but will improve in FY2025.

“Monetary policy is expected to remain supportive of growth as inflation abates, while fiscal policy aims for consolidation but retains support for capital investment. On balance, growth is forecast to slow to seven per cent in FY2024 but improve to 7.2 per cent in FY2025,” it said

To boost exports in the medium term, India needs greater integration into global value chains, the ADB added.

The ADB’s growth forecast for FY25 is in line with the projections made by the Reserve Bank of India (RBI).

The RBI last week had said GDP growth in the current fiscal is projected at seven per cent on expectations of normal monsoon, moderating inflationary pressures and sustained momentum in manufacturing and services sectors.

 India’s dominant services industry grew faster in March 2024 amid strong demand, according to a private business survey that also showed employment increased at the fastest rate in seven months and export business expanded at a record pace.
| Photo Credit: The Hindu

India’s services sector witnessed one of the strongest growth rates in over 13-and-a-half years in March on the back of strong demand that spurred sales and business activity, a monthly survey said on Thursday, April 4, 2024.

The seasonally adjusted HSBC India Services Business Activity Index rose from 60.6 in February to 61.2 in March, one of the strongest expansions in total sales and business activity in close to 14 years.

In the Purchasing Managers’ Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

The HSBC India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies.

“India’s services PMI rose in March, following a small dip in February, on the back of strong demand that spurred sales and business activity. Service providers increased hiring at the fastest pace since August 2023 in order to expand production capacity,” said Ines Lam, Economist at HSBC.

The upturn was largely attributed to healthy demand conditions, efficiency gains, and positive sales developments, the survey said.

Companies signalled a substantial improvement in new order intakes during March. The rate of growth was one of the best seen since June 2010.

New export business rose at the fastest rate since the series started in September 2014. Survey participants reported gains from Africa, Asia, Australia, Europe, the Americas, and the Middle East.

Addtional recruitment in services sector

Services companies indicated that the substantial upturn in new business volumes added pressure on their capacities. Accordingly, service providers recruited additional staff in March.

“The latest increase in employment was the 22nd in as many months, and the joint-strongest since November 2022,” the survey said.

The survey further noted that there has been an intensification of price pressures, with both input costs and output charges increasing at faster rates.

“Input costs rose at a faster rate, yet service providers were able to broadly maintain margins by charging higher output prices,” the survey said.

Going ahead, services companies expect demand trends to remain favourable, with marketing efforts also seen as a growth opportunity. There were, however, some concerns surrounding competitive pressures, the survey said.

Meanwhile, the HSBC India Composite PMI Output Index rose from 60.6 in February to 61.8 in March, highlighting the second-strongest upturn in over 13-and-a-half years.

Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices. Weights reflect the relative size of the manufacturing and service sectors, according to official GDP data.

March data pointed to a sharp increase in aggregate output across India, as both goods producers and service providers noted a pick-up in growth.