India Ratings revises upward India’s GDP growth estimate for FY25 to 7.1% from 6.5% earlier

07 May 2024 Evaluate

Expressing optimism over India’s economic growth, India Ratings and Research has revised upward the country’s Gross Domestic Product (GDP) growth estimate for FY25 to 7.1 per cent from 6.5 per cent earlier. In a statement, the domestic rating agency said strong support from the sustained government capex, deleveraged balance sheets of corporate and banking sector, and the incipient private corporate capex cycle make it revise its estimate. It said that factors that may constrain growth include consumption demand not being broad based and the headwinds faced by exports due to sluggish growth globally.

The agency said it expects the growth in private final consumption expenditure to jump to 7 per cent in FY25, up from 3 per cent in FY24, and added that this will be a three-year high. It noted current consumption demand is highly skewed, as it is driven by the goods and services largely consumed by the households belonging to the upper income bracket, and added that rural consumption is weak. Above normal monsoon, jump in wheat procurement by Food Corporation of India at 37 million tonnes versus 26 million tonnes in FY24 will help the consumption story.

It said ‘Sustained real wage growth of the households belonging to the lower income bracket is an imperative for a sustainable and broad-based recovery in consumption demand’. On the capex front, it said private sector activity has remained down for several years but added that a new cycle is in the offing as seen from the increase in the project loans sanctioned by lenders. It further said the headline inflation will moderate in FY25, but the Reserve Bank will remain vigilant.