Ind-Ra ups FY25 GDP growth forecast to 7.5% on expectation of high demand

India Ratings & Research (Ind-Ra) increased India's GDP growth forecast for the current fiscal year to 7.5% from the earlier projection of 7.1%, citing improved consumption demand. The agency stated, "The ongoing growth momentum led by government capex, deleveraged balance sheets of corporates/banks, and an incipient private corporate capex cycle has now found support from the union government budget." The budget aims to bolster agricultural/rural spending, improve credit delivery to MSMEs, and incentivize economic employment creation. Ind-Ra believes these measures will help broaden the consumption demand base, prompting the upward revision of its GDP growth estimate for FY25 to 7.5%. This projection is higher than the RBI, which projected FY25 growth at 7.2%, and the Finance Ministry's Economic Survey, which estimated GDP expansion between 6.5-7%.

Ind-Ra expects Private Final Consumption Expenditure (PFCE) to grow to a 3-year high of 7.4% in FY25, up from 4% in FY24. The current consumption demand is skewed, driven primarily by goods and services consumed by upper-income households. However, Ind-Ra anticipates that an above-normal monsoon coupled with measures announced in the union budget for FY25 will correct this imbalance by boosting the demand for goods and services consumed by rural and lower-income households. Despite food inflation posing a risk, the agency added that the expectation of lower average retail inflation in FY25 compared to FY24 will support real wage growth.

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