Government expects economy to expand 7% in FY25 on good monsoon
Government’s estimate, which is in line with RBI’s projection, is based on an assessment that domestic economic activity remains resilient on the back of strong investment demand and upbeat business and consumer sentiments.A sustained govt capex push and free trade agreements are expected to add thrust.
“We will see faster growth in private final consumption expenditure in FY25 due to better monsoon and pick up in rural demand,” a source said, while dismissing concerns over a moderation in consumption growth to 4% last year, from 6.8% in the previous year. Sources said the moderation happened after an average growth of over 9% in the preceding two years.
Most agencies are projecting 6.5-7% GDP growth for current financial year. On Friday, Moody’s Ratings projected India to grow 6.8% this year, followed by 6.5% in 2025, on the back of strong economic expansion and an expectation of policy continuity post-poll.
Government expects economic expansion to stabilise around 6.5-7% potential rate of growth. “The economy is capable of sustaining the potential growth rate as long as we can keep inflation under check and prolong the financial cycle,” sources added.
During a webinar, S&P Global Ratings analyst YeeFarn Phua said India’s long term growth potential could be around 8% once the impact of high infrastructure investment is realised and bottlenecks are removed.
Government has, however, identified several risk factors, with geopolitical tension being a major threat to global as well as India’s growth. Divergence in monetary easing path of global central banks, which are seeking to moderate inflation, is seen to be adding to policy uncertainty. Food price challenges, accentuated by climate risk, are making the task tougher, although govt and RBI believe they have jointly delivered on these fronts by cooling down prices in domestic market.
Besides, there are some worries over elevated financial market valuations, mainly in the US, which could have a dampening impact on Indian markets. Although FM Nirmala Sitharaman and CEA V Anantha Nageswaran had flagged concerns over futures & options segment in Indian markets, it is not seen as a systemic risk yet.
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