Expecting the consumption demand to improve, India Ratings and Research (Ind-Ra) has revised up its India’s Gross Domestic Product (GDP) growth estimate for Financial Year 2025 (FY25) to 7.5 per cent from an earlier forecast of 7.1% per cent. Ind-Ra also expects the private final consumption expenditure (PFCE) to grow 7.4 per cent year-on-year (YoY) in FY25.
Ind-Ra’s growth estimate is higher than the Reserve Bank of India’s forecast of 7.2 per cent. The economic survey of the Finance Ministry also expects the GDP to grow at 6.5 to 7 per cent for the year.
As per Ind-Ra, the budget promises to bolster agricultural or rural spending, improve credit delivery to micro, small and medium enterprises (MSMEs) and incentivise employment creation in the economy. The ongoing growth momentum led by government capex, and deleveraged balance sheets of corporates/banks has now found support from the union government budget, according to Ind-Ra.
As far as the PFCE is concerned, Ind-Ra expects it to rise to a three-year high in the current financial year by achieving a 7.4 per cent YoY growth, up from 4 per cent in FY24. Ind-Ra believes that an above-normal monsoon coupled with the measures introduced in the union budget FY25 is expected to boost the demand for goods and services consumed by the rural and households belonging to the lower income bracket.
Although food inflation continues to be a risk, the expectation of retail inflation in FY25 averaging lower than in FY24 will support the real wage growth, according to Ind-Ra.
Ind-Ra expects goods and services exports to grow 6.6 per cent YoY and imports to grow 8.8 per cent YoY in FY25, as against 2.6 per cent YoY and 10.9 per cent, respectively, in FY24. Although global trade is showing signs of gathering momentum in the first quarter of FY25, increased global supply concentration, trade fragmentation and protectionism pose significant risks to India’s exports.
