India Ratings raises sovereign GDP growth estimate for FY25 to 7.1%

India Ratings and Research has revised its GDP growth estimate for FY25 upwards to 7.1%, citing several factors contributing to this optimism. They attribute the revision to sustained government capital expenditure, improved corporate and banking sector balance sheets, and the beginning of a new private corporate capital expenditure cycle. Despite this positive outlook, they caution that growth may be constrained by uneven consumption demand and challenges in exports due to sluggish global growth. They highlight the need for broader-based consumption growth, particularly emphasizing the importance of sustained real wage growth for households in the lower income bracket.

Moreover, the agency foresees a notable surge in private final consumption expenditure to 7% in FY25, a significant increase from the 3% recorded in FY24, potentially marking a three-year peak. They observe that the current demand for consumption is skewed towards wealthier households, while rural consumption exhibits weakness. Nonetheless, they express confidence that factors such as an above-average monsoon and heightened wheat procurement by the Food Corporation of India will reinforce consumption. Additionally, they highlight emerging signs of a new cycle in private sector activity, as indicated by a rise in project loans approved by lenders. Lastly, while they anticipate a moderation in headline inflation for FY25, they expect the Reserve Bank to remain vigilant.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.