Asian Development Bank pegs India's economic growth at 7.5% for 2022-23

New Delhi: The Asian Development Bank (ADB) on Wednesday said the Indian economy is projected to grow by 7.5 per cent in the current financial year and the growth would accelerate to 8 per cent in 2023-24.

The economic growth in the coming years will be supported by increased public investment in infrastructure and a pickup in private investment, according to the Asian Development Outlook (ADO) 2022, the latest edition of ADB’s flagship economic publication.

The outlook assumes sustained progress in COVID-19 vaccinations while also that any new variants of the virus would be of limited severity. It also factors in the impact of Russia’s invasion of Ukraine, primarily higher global oil and commodity prices that will contribute to rising inflation and a widening of the current account deficit, ADB said in the report.

“India is on the path to a sustained economic recovery, thanks to the vigorous countrywide drive to deliver safe and wide-reaching COVID-19 vaccinations, which helped reduce the severity of the third pandemic wave with minimal disruptions to mobility and economic activity,” said ADB Country Director for India Takeo Konishi.

“The Government of India’s policy to improve logistics infrastructure, incentives to facilitate industrial production, and measures to improve farmers’ income will support the country’s accelerated recovery,” Konishi said in the report.

Risks to the outlook include uncertain global economic conditions, potential new surges in COVID-19 cases, and sharp rises in commodity prices.

Large public infrastructure investments planned over the next two years will encourage more private investment.

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Together with the PM Gati Shakti initiative to improve India’s logistics infrastructure, increased financial and technical support to states to expand capital investment will boost infrastructure spending and help spur economic growth.

Private consumption will pick up as labour market conditions improve. Forecasts are based on a normal Monsoon, which coupled with rising wheat prices, is expected to boost agriculture output and improve farmers’ income. The government’s production-linked incentive scheme will provide a thrust to the manufacturing sector in 2022-23 and 2023-24.

On price rise, the ADB said inflation is likely to increase to 5.8 per cent in 2022-23 amid rising oil prices.

“While the monetary policy will remain accommodative, the central bank may hike policy rates in the latter part of the fiscal due to tightening of the United States federal funds rate and elevated oil prices,” ADB said.

The current account deficit is projected to widen to 2.8 per cent of gross domestic product in 2022-23 due to the rising oil import bill and is expected to decline to 1.9 per cent in 2023-24 amid an uptick in export growth. Foreign direct investment inflow is expected to moderate amid rising global uncertainty and tightening of global economic and financial conditions.

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