India Ratings and Research has raised its GDP growth forecast for FY25 to 7.1%, citing several factors contributing to this positive outlook. They attribute the upward revision to sustained government capital spending, improved corporate and banking sector balance sheets, and the initiation of a new phase in private corporate investment. However, they caution that uneven consumption demand and challenges in exports due to sluggish global growth could limit growth prospects. They stress the importance of broader-based consumption growth, particularly emphasizing the need for sustained real wage growth for lower-income households.
Furthermore, the agency predicts a significant increase in private final consumption expenditure to 7% in FY25, marking a substantial rise from the 3% recorded in FY24 and potentially reaching a three-year peak. They note that current consumption demand is skewed towards wealthier households, with rural consumption showing weakness. Nevertheless, they express confidence that factors such as favorable monsoon conditions and increased wheat procurement by the Food Corporation of India will bolster consumption. Additionally, they highlight emerging signs of a new cycle in private sector activity, evidenced by a surge in project loans sanctioned by lenders. Finally, while they anticipate a moderation in headline inflation for FY25, they expect the Reserve Bank to maintain a watchful stance.
