On July 31, 2024, India Ratings & Research (Ind-Ra) upgraded India’s Gross Domestic Product (GDP) growth forecast for FY25 to 7.5% from the earlier estimate of 7.1%, citing improved consumption demand.
- This projection exceeds the Reserve Bank of India’s (RBI) expectation of 7.2%; Ministry of Finance’s Economic Survey estimate of 6.5-7%; the International Monetary Fund/IMF (7%) and the Asian Development Bank/ADB (7%).
Highlights:
i.The Gross Fixed Capital Formation is expected to increase by 8.9% year-on-year in FY25, , slightly down from 9% in FY24.
ii.Government Final Consumption Expenditure (GFCE) is expected to grow 4.4% Y-o-Y in FY25, compared to 2.5% in FY24.
- The Private Final Consumption Expenditure (PFCE) is expected to grow at 3-year high of 7.4% Year-on-Year (Y-o-Y) in FY25, up from 4% in FY24.
iii.The fiscal deficit target of 4.9% of GDP in FY25 is deemed achievable.
iv.Consumer Price Index (CPI) inflation is estimated at 4.5% and Wholesale Price Index (WPI) inflation at 3.2% in FY25.
v.Capital account flows are estimated to improve to USD 111.4 billion in FY25 from USD 86.3 billion in FY24, leading to a net addition of USD 84.7 billion in forex reserves.
vi.Conservative estimates include USD 15 billion inflows due to India’s inclusion in the JP Morgan EM Bond Index, helping the Indian rupee average 84.69/USD in FY25.
vii.The current account balance plus net FDI (Foreign Direct Investment) is likely to improve to negative USD 2.3 billion in FY25 from negative USD 13.5 billion in FY24.
Other Key Factors:
i.Goods and services exports are anticipated to grow 6.6% Y-o-Y and imports by 8.8% Y-o-Y in FY25, as opposed to 2.6% and 10.9% respectively in FY24.
ii.The service sector is projected to grow 8% Y-o-Y in FY25 and the industrial sector is expected to grow 7.4% Y-o-Y in FY25, supported mainly by construction and manufacturing.
iii.Agricultural sector growth is anticipated to be 4.3% in FY25, driven by above-normal monsoons and normal Kharif sowing, compared to 1.4% in FY24.
iv.Merchandise imports are expected to grow at 5.7% Y-o-Y in FY25, while merchandise exports are projected to grow at 5.1% Y-o-Y, resulting in a trade deficit estimated at USD 268.5 billion (6.9% of GDP).
v.Remittances and software exports are expected to help keep the Current Account Deficit (CAD) under control at USD 29.7 billion (0.8% of GDP) in FY25.
Recent Related News:
i.Moody’s Ratings’ Global Macro Outlook 2024-25 (May 2024 update) has projected India’s Gross Domestic Product (GDP) to grow by 6.8% in 2024 followed by 6.5% in 2025.
ii.Singapore-based DBS Bank Ltd (formerly known as Development Bank of Singapore Limited) retained its projection for India’s Gross Domestic Product (GDP) at 7% for FY25 (2024-25).
About India Ratings and Research (Ind-Ra):
It is a 100% owned subsidiary of the Fitch Group.
Chairman, Managing Director (MD) & Chief Executive Officer (CEO)– Rohit Karan Sawhney
Headquarters– Mumbai, Maharashtra
Establishment– 1995
