India's economy to surge: FY25 GDP growth forecast at 7.1% (Ind-Ra)

India Ratings and Research, or Ind-Ra, has revised the country’s GDP growth estimate for the fiscal year 2024-’25 (FY25) to over 7.1 per cent from its earlier projection of 6.5 per cent.

Ind-Ra’s amended forecast is more than the 7.0 per cent prediction that the Reserve Bank of India's (RBI) made, which indicates that the agency expects India to witness greater growth in the first and fourth quarters of FY25 than the RBI, but lesser growth in the second and third quarters.

Wholesale inflation should be around 2.9 per cent in FY25 while retail inflation is expected to be in the range of 4.6 per cent, Ind-Ra predicted.

The Private Final Consumption Expenditure (PFCE) should increase year on year by 7.0 per cent in FY25, which should mark a three-year high according to Ind-Ra estimates. The pattern of consumption currently remains uneven, the agency added, because goods and services are purchased mostly by high-income brackets. While consumption is so far weak in the rural sector, Ind-Ra hopes the India Meteorological Department’s forecast of an above-normal monsoon this year should help outdo the procurement figures that the Food Corporation of India (FCI) has set.

Ind-Ra’s revised data for GDP growth in FY25 is backed up by positive measures such as continued government capital expenditure, deleveraged corporate and banking sector balance sheets, and the upcoming private corporate capital expenditure cycle. On the other hand, the impact of geopolitical unrest and global economic instability, besides irregularity in demand of goods and services, are the factors that can have a negative impact.

According to Ind-Ra, the Centre’s budget for capital expenditure is Rs 11.1 trillion while the states have allocated Rs 9.5 trillion, indicating a continuing focus on infrastructural development. Demand for investment in India is still primarily driven by government capital expenditure, and Gross Fixed Capital Formation (GFCF) expected to grow year on year by 8.5 per cent in FY25.

The services sector will overall see an increase by 7.8 per cent year on year in FY25, with services in real estate, finance and other professional services witnessing an 8.1-per cent jump.

Goods and services exports should grow by 6.6 per cent year on year while imports could see an 8.8-per cent rise year on year in FY25, in comparison with FY24 when the numbers stood at 1.5 per cent and 10.9 per cent respectively. Industrial growth should see a jump of seven per cent year on year while the agricultural sector, expected to reap the benefits of an above-normal monsoon, should grow at 3.6 per cent.

The research and ratings agency Ind-Ra aims at providing credit markets of India with accurate and prospective credit opinions. The agency analyses creditworthiness of securities, too.