Updated March 6th, 2024 at 18:55 IST

Indian economy to grow at 6.8% in FY25: CRISIL

The fiscal impulse is expected to diminish as efforts are made to reduce the fiscal deficit to 5.1 per cent of GDP in the upcoming fiscal year.

Reported by: Business Desk
GDP | Image:Freepik

India’s growth in FY25: India's real GDP outperformed expectations, expanding by 7.6 per cent this fiscal year, but growth is anticipated to moderate to 6.8 per cent in fiscal 2025. The slowdown is attributed to higher interest rates and reduced fiscal stimulus impacting demand. Despite this, India is set to maintain its position as the fastest-growing large economy and is expected to achieve upper middle-income status by 2031, rating agency CRISIL said on Wednesday. The fiscal impulse is expected to diminish as efforts are made to reduce the fiscal deficit to 5.1 per cent of GDP in the upcoming fiscal year. Nevertheless, government spending in infrastructure and rural sectors is expected to provide a boost to the investment cycle and rural incomes.

Inflation softened in the current fiscal year due to easing input costs and slower domestic demand, but elevated food inflation prevented a more substantial decline. The projection for this softening trend to persist in the next fiscal year is driven by healthier agricultural output and stable oil and commodity prices.


The growth momentum is expected to continue over the next decade, fueled by significant private investments in emerging sectors, ongoing government spending on infrastructure, continued reforms, and efficiency gains from increasing digitalisation and physical connectivity.

According to Amish Mehta, Managing Director and CEO of CRISIL Ltd, India's economy is expected to surpass the $5 trillion mark in the next seven fiscal years and approach $7 trillion with an estimated average annual growth of 6.7 per cent by fiscal 2031. By that time, India is anticipated to become the third-largest economy and an upper middle-income country, positively impacting domestic consumption.


Manufacturing and Services Sector

Both manufacturing and services sectors are expected to contribute to robust economic growth, with manufacturing projected to grow at 9.1 per cent and services at 6.9 per cent between fiscals 2025 and 2031. Despite manufacturing catching up, services will remain the dominant driver of India's growth.


Fixed investments by private companies are on the rise after years of stagnancy, and government initiatives continue to boost infrastructure segments. Healthy balance sheets, strategic deleveraging, and strong lenders position India Inc for revenue growth of 9-10 per cent in the next fiscal year, supporting the utilization of existing capacities.

Industrial capital expenditures are expected to increase substantially, reaching Rs 6.5 lakh crore annually on average between fiscals 2024 and 2028. Investments in emerging sectors, such as electric vehicles, semiconductors, and electronics, are anticipated to rise significantly, constituting 20 per cent of overall industrial capital expenditures.


While challenges exist, including geopolitical uncertainties, global indebtedness, economic recovery disparities, climate change, and technological disruptions, India's growth is expected to receive support from domestic structural factors and cyclical levers. Overall, there is a justified sense of optimism about India's resilience and immense growth opportunities.


Published March 6th, 2024 at 13:46 IST

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