Ind-Ra raises FY25 GDP growth forecast to 7.1%, edges past RBI's projections

GDP outlook surges: India Ratings and Research (Ind-Ra) has adjusted its prediction for FY25 GDP growth to 7.1 per cent, up from the previous estimate of 6.5 per cent. This figure slightly surpasses the Reserve Bank of India's (RBI) forecast of 7.0 per cent. 

Ind-Ra foresees a stronger performance in the first and fourth quarters of FY25 compared to the RBI's projections, while expecting slightly lower growth in the second and third quarters.

Growth driven by investments

The growth trajectory is being propelled by ongoing government capital expenditure, the improved financial health of corporations and banks, and the emerging cycle of private corporate investment. However, challenges persist, notably in the form of uneven consumption demand and global trade pressures.

Ind-Ra notes that current consumption patterns are skewed towards higher-income households, with rural consumption remaining weak. However, the agency anticipates potential support for rural consumption in FY25 due to anticipated above-normal monsoon rains and increased procurement of wheat by the Food Corporation of India.

Ind-Ra urges wage growth

Ind-Ra stresses the importance of sustained real wage growth amongst lower-income households for a more inclusive and robust recovery in consumption.

Regarding investment, the government continues to play a leading role through its sustained capital expenditure. Private sector investment, although subdued in recent years, shows signs of revival across various sectors. Ind-Ra highlights a shift in government expenditure focus towards capital expenditure, resulting in restrained growth in revenue expenditure.

On the export front, while Ind-Ra anticipates growth in both goods and services exports for FY25, challenges persist due to factors such as inflation-induced erosion of purchasing power and global trade dynamics. The agency points to restrictive trade policies in advanced economies and geopolitical uncertainties as additional hurdles.

Agricultural sector monsoon boost

Looking at specific sectors, steady growth is expected in the services sector, with financial services, real estate, and professional services anticipated to lead the expansion. The industrial sector is projected to grow moderately, supported mainly by construction and utility activities. Favourable monsoon forecasts are expected to benefit the agricultural sector.

Ind-Ra forecasts moderate levels of retail and wholesale inflation for FY25, citing elevated food prices as a key contributing factor. The Reserve Bank of India is expected to maintain a vigilant stance to manage inflationary pressures.