Active Stocks
Thu May 23 2024 14:50:27
  1. Tata Steel share price
  2. 175.00 0.98%
  1. NTPC share price
  2. 371.10 -0.75%
  1. Power Grid Corporation Of India share price
  2. 318.05 -2.38%
  1. Indusind Bank share price
  2. 1,442.35 2.31%
  1. State Bank Of India share price
  2. 831.00 1.43%
Business News/ Economy / India to grow 6.8% in FY25, become upper-middle-income economy by FY31: Crisil
BackBack

India to grow 6.8% in FY25, become upper-middle-income economy by FY31: Crisil

In the December quarter, the economy soared ahead with a surprise growth of 8.4%, as manufacturing, electricity and construction sectors put up a robust show

 By FY31, the Indian economy will near the $7 trillion milestone, positioning the it as an upper-middle-income country within the next seven years. (Image: Pixabay)Premium
By FY31, the Indian economy will near the $7 trillion milestone, positioning the it as an upper-middle-income country within the next seven years. (Image: Pixabay)

New Delhi: The Indian economy will likely grow at 6.8% in the next fiscal year, slightly below the central bank's forecast of 7%, as higher interest rates and lower fiscal impulse could temper demand in the South Asian country, ratings agency Crisil said in a report on Wednesday.

The rating agency also said that by fiscal year 2030-31 (FY31), the economy will near the $7 trillion milestone, with an average annual growth rate of 6.7%, positioning India as an upper-middle-income country within the next seven years.

The World Bank classifies upper middle-income economies as those with a Gross National Income (GNI) per capita ranging from $4,256 to $13,205. In contrast, lower middle-income economies have a GNI per capita between $1,086 and $4,255. 

Middle-income countries, encompassing 75% of the global population and 62% of the world's impoverished, contribute to approximately one-third of the worldwide gross domestic product (GDP).

According to the latest government data, India's per-capita income stood at 1,69,496, or $2,040, in FY23.

Despite its FY25 growth forecast being slightly below the RBI's 7% projection, Crisil maintained that India will remain the world's fastest-growing major economy.

"The fiscal impulse will be lesser because of the need to reduce the fiscal deficit to 5.1% of GDP next fiscal according to the glide path presaged," the rating agency said. “However, the nature of government spending will provide some support to the investment cycle and rural incomes."

In the December quarter, the Indian economy soared ahead with a surprise growth of 8.4%, belying fears of tempering as the manufacturing, electricity and construction sectors put up a robust show.

The higher-than-expected growth recorded during the quarter led to the statistics ministry to raise its GDP growth estimate for FY24 to 7.6% in its second revised estimate, up from 7.3% in its first advance forecast.

Key sectors like mining, manufacturing, construction, and services are driving the India's economic expansion this year.

Crisil also foresees a dip in inflation in the next fiscal year, driven by reduced input costs, subdued domestic demand, improved agricultural production, and stable oil and commodity prices.

Recent government data revealed that January saw consumer price index-based retail inflation dropped to a three-month low of 5.1%, helped by a slower rise in prices of food item. While retail inflation remains above the RBI's 4% goal, it has stayed within the 2-6% tolerance range for five consecutive months.

The agency expects India's growth momentum to persist throughout the decade, fuelled by significant private sector investments in new industries, consistent government infrastructure spending, ongoing reforms, and the benefits of digital and physical connectivity enhancements.

“The next seven fiscals will see the Indian economy cross the $5 trillion mark and close in on $7 trillion at an estimated 6.7% average annual growth. By fiscal 2031, India will be the No. 3 economy and an upper middle-income country, which will be a big positive for domestic consumption," said Amish Mehta, managing director and chief executive, Crisil Ltd.

Mehta emphasized that the domestic manufacturing sector is at sweet spot, buoyed by high capacity utilization, global supply chain diversification opportunities, infrastructure investment focus, green transition priorities, and strong lender balance sheets. He anticipates continuous reforms, increased global competitiveness, and value chain advancements to enhance manufacturing's contribution to India's GDP beyond the expected 20% by FY31.

You are on Mint! India's #1 news destination (Source: Press Gazette). To learn more about our business coverage and market insights Click Here!

ABOUT THE AUTHOR
Rhik Kundu
Rhik writes about the Indian economy and its crucial indicators. He is constantly navigating corporates, decoding policies, and dabbling with everything in between.
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 06 Mar 2024, 06:11 PM IST
Next Story footLogo
Recommended For You