India’s Future Shines Bright: 6.8% Economic Growth Forecast for FY25

New Delhi (The Uttam Hindu): S&P Global Ratings on Tuesday projected 6.8 per cent growth for the Indian economy in FY25, followed by 6.9 per cent growth in FY26, on the back of strong urban consumption, steady service sector growth, and ongoing investment in infrastructure. The growth projection by S&P Global Ratings is higher than the latest Reserve Bank of India’s (RBI) forecast for India’s GDP growth for 2024-25 at 6.6 per cent, from 7.2 per cent earlier.

The global credit rating agency also projected 7.0 per cent GDP growth for the Indian economy in FY27, maintaining its positive outlook for the country which remains the fastest-growing economy in the world. “We expect the central bank to ease monetary policy modestly during 2025 as inflationary pressures recede,” said Vishrut Rana, economist, S&P Global Ratings.

The Indian economy is set for resilient growth in 2025. “We currently project 6.8 per cent growth for the economy for FY 2024/25 followed by 6.9 per cent growth in FY 2025/26,” Rana added. The GDP growth for Q2 (June-September 2024) in FY25 stood at 5.4 per cent which was lower than anticipated.

However, the country has been growing rapidly amid a slowing global economy due to the government's prudent fiscal management for macroeconomic stability. The fiscal management has maintained the perfect balance between the fiscal deficit and fiscal support for growth. According to outgoing RBI Governor Shaktikanta Das, India’s growth story was intact as “going forward, high-frequency indicators available so far suggest that the slowdown in domestic economic activity bottomed out in the second quarter of this year and it has since recovered aided by strong festive demand and pickup in rural activities.”

Industrial activity is also expected to normalise and recover from the lows of the previous quarter, said Das. S&P Global Ratings said that higher labour force participation, further infrastructure and technology improvement, and stronger public and household balance sheets can support economic growth in India. “Better urban infrastructure and improved quality of jobs can crowd in labour force participation,” said Rana. The central bank, in its recent Monetary Policy Committee (MPC) meeting, announced a cash reserve ratio (CRR) cut of 50 bps which will add over Rs 1.16 lakh crore of liquidity.