The Asian Development Bank (ADB) has reduced India's GDP growth forecast for the fiscal year 2023-24 to 6.3% due to erratic monsoon rainfall patterns affecting crop yields, particularly rice and pulses. Agriculture and allied sectors, which employ nearly half of India's workforce and contribute to about 18% of GDP, have been hit.
However, the ADB has maintained its 6.7% growth projection for FY 2024-25, citing strong corporate profitability and bank credit that will support private investment. The services sector is expected to grow, driven by a robust banking sector and real estate. India's consumption is also predicted to remain strong, supported by an improving labor market. While the ADB foresees a moderation in inflation, the central bank is not expected to raise policy rates in 2023, and there may be a rate cut next year. The external trade front presents challenges, with weak demand in global markets affecting exports but improving external balances due to shrinking trade deficits and robust service exports.