The Asian Development Bank (ADB) has projected growth in India’s gross domestic product (GDP) to moderate to 6.4 per cent in fiscal year (FY) 2023 ending on March 31, 2024 and rise to 6.7 per cent in FY2024, driven by private consumption and private investment on the back of government policies to improve transport infrastructure, logistics, and the business ecosystem.

The projection is part of the latest edition of ADB’s flagship economic publication, Asian Development Outlook (ADO) April 2023, released on Tuesday. The growth moderation for India in FY2023 is premised on an ongoing global economic slowdown, tight monetary conditions, and elevated oil prices.

However, FY2024 is expected to see faster growth in investment, thanks to supportive government policies and sound macroeconomic fundamentals, lower non-performing loans in banks, and significant corporate deleveraging that will enhance bank lending, according to ADO April 2023.

“Despite the global slowdown, India’s economic growth rate is stronger than in many peer economies and reflects relatively robust domestic consumption and lesser dependence on global demand,” said Takeo Konishi, ADB Country Director for India. “The Government of India’s strong infrastructure push under the Prime Minister’s Gati Shakti (National Master Plan for Multimodal Connectivity) initiative, logistics development, and industrial corridor development will contribute significantly to raising industrial competitiveness and boosting future growth.” Improving labour market conditions and consumer confidence will drive growth in private consumption. The central government’s commitment to significantly increase capital expenditure in FY2023, despite targeting a lower fiscal deficit of 5.9 per cent of GDP, will also spur demand.

However, manufacturing growth in FY2023 is expected to be tamped down by a weak global demand, but it will likely improve in FY2024. Recent announcements to boost agricultural productivity, such as setting up digital services for crop planning and support for agriculture startups will be important in sustaining agriculture growth in the medium term.