Outlook for economy is bright, growth likely to be 7% in FY25: Sitharaman

FinMin bullish on growth: The Finance Ministry has presented an optimistic outlook for the Indian economy, projecting a robust 7 per cent growth rate in the upcoming fiscal year. This comes on the back of an estimated 7.3 per cent growth rate for the ongoing fiscal year, marking the third consecutive year of GDP growth exceeding 7 per cent. Global agencies have taken note of India's favorable growth prospects, with upward revisions spurred by a strong Q2 performance and supportive measures outlined in the Interim Union Budget FY25, as highlighted in the Monthly Economic Review released by the finance ministry.

The report underscores the resilience of the Indian economy in the face of geopolitical challenges and emphasizes the anticipated impact of measures outlined in the Interim Union Budget on sustaining this growth trajectory.

Looking ahead, the report identifies several positive factors, including expectations of a robust Rabi harvest, sustained profitability in manufacturing, and resilience in services. On the demand side, improvements are expected in household consumption, and positive prospects for fixed investment are driven by an upturn in the private capex cycle, improved business sentiments, and government emphasis on capital expenditure.

Reliefs and Problems

Despite the promising outlook, the report acknowledges potential challenges, including geopolitical tensions, volatility in international financial markets, and geoeconomic fragmentation, necessitating close monitoring. The global economic slowdown, particularly in India's major trading partners, has impacted merchandise exports.

However, a decline in international commodity prices has contributed to a narrowing merchandise trade deficit, and the capital account reflects strength, attracting Foreign Portfolio Inflows (FPIs).

On the inflation front, the report notes easing pressure in January 2024, driven by declines in food and core inflation. Government measures to control food prices are expected to further alleviate inflation concerns. Positive signals include the anticipation of El Nino fading away and a forecast of a normal monsoon, providing optimism for the agricultural sector.

The report also highlights positive trends in the employment sector, with a decline in the urban unemployment rate in Q3 of FY24 and robust growth in formal sector employment, evident in the increased subscription base of the Employees Provident Fund Organisation (EPFO). Overall, the report paints a promising picture of India's economic trajectory, emphasizing a mix of domestic and global factors that will shape the nation's economic journey.