StanChart Bank Revises India’s Growth Outlook, Projects 6.3% Growth

Household consumption will need to increase if India is to achieve a GDP growth of 6 per cent or higher next fiscal year suggested a report by Standard Chartered, released on Monday. The research group of the global bank has revised its financial year 2024-25 (FY25) forecast upward to 6.3 per cent from the 6 per cent projected earlier. 

It predicted muted inflation and higher food spending to help household consumption drive growth in the coming fiscal year. The economists also noted that a revival in consumption could partially offset the impact of lower commodity prices on the manufacturing sector, slower global growth and a moderation in government capital expenditure amid national elections.

According to a report, India's growth is estimated to be 7.3 per cent in FY24. However, the growth of private final consumption expenditure has slowed down to 4.4 per cent from 7.5 per cent in the previous fiscal year. The report has revised its FY24 forecast upward to 6.8 per cent from 6.7 per cent, mainly due to increased economic activity.

Standard Chartered, in its analysis, has predicted that household consumption expenditure will increase, particularly in the food and beverages segment. This segment accounts for nearly 54 per cent of rural household spending and over a third of spending by urban households.

Standard Chartered economists have also stated that if the El Niño weather effect fades from April and if monsoon rains are normal this year, higher agriculture output and controlled inflation could lead to a rebound in overall household food spending in FY25.

A finance ministry review released on Monday stated that the Indian economy is expected to grow by almost 7 per cent in FY25, due to the country's resilient domestic conditions and reforms. However, the review also noted that the upcoming fiscal year will not see a sharp rebound in agricultural output, unlike in FY17. 

This is because real wage growth is predicted to be only marginally positive. Nonetheless, if food spending growth increases by 3 to 4 basis points (bps) from FY24 levels, the overall GDP could be boosted by 45 to 60 bps, according to the review's estimation.