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India GDP growth: The Indian economy is expected to grow nearly 6.5 per cent in the current fiscal year 2024-25 (FY25), closer to the lower end of the 6.5-7 per cent projection, against 8.2 per cent a year before, due to global uncertainties and triggers posing a dampening threat. The Finance Ministry expects a gross domestic product (GDP) growth of 6.5 per cent in FY25 after the economy slowed to 5.4 per cent in the July-September quarter.
“We expect the economy to grow at around 6.5 per cent in real terms in the financial year 2024-25,” said the Finance Ministry's Department of Economic Affairs in its monthly economic report for November. The estimate aligns with the Reserve Bank of India (RBI)'s revised 6.6 per cent growth forecast for FY25. The July Economic Survey projected GDP growth at 6.5- 7 per cent.
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According to the finance ministry's monthly economic report for November, the economic growth outlook for October to December, or the third quarter (Q3FY25), appears bright. Rural demand is seen to be resilient, and urban demand logged a recovery in the first two months of the quarter.
The report said an increase in the Minimum Support Price (MSP) for rabi crops, a high reservoir level, and adequate fertiliser availability bodes well for rabi sowing, adding that industrial activity is likely to gain traction.
Strong growth in two—and three-wheeler sales and domestic tractor sales in October and November point to resilient rural demand, while a robust pickup in air passenger traffic in the period indicates recovery in urban demand.
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“India’s growth outlook in FY26 for the coming years is bright when viewed through the lens of Indian domestic economic fundamentals, but is also subject to fresh uncertainties,” said the report, released on Thursday. On average, India grew at six per cent in the first half of 2024-25.
Also, inflationary pressures softened in November 2024, driven by lower food and core inflation. The finance ministry argues that an influx of fresh produce in the market has moderated vegetable price pressures. The RBI has projected CPI inflation at 4.8 per cent for FY25, with Q3 at 5.7 per cent and Q4 at 4.5 per cent.
"Healthy progress in rabi sowing indicates a promising harvest that will help alleviate food inflation pressures. The downward trend in international crude oil prices is a positive factor for domestic inflation, while elevated global edible oil prices remain a risk," said the finance ministry report.
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India's GDP growth slowed unexpectedly to a seven-quarter low of 5.4 per cent in the July-September period hampered by weaker expansion in manufacturing and consumption, which was also 160 basis points lower than what the RBI had forecast. This led the RBI to revise its full-year forecast to 6.6 per cent from 7.2 per cent. Economists now expect that new RBI Governor Sanjay Malhotra will cut interest rates in the February policy.
Still, India has maintained that its economy will grow at a world-beating pace of 6.5-7 per cent despite a challenging environment. The report said that the economic outlook is expected to be better between October-to-March (H2FY25) than in the first six months of the financial year.
The finance ministry partly blamed the RBI's restrictive policies for the slowdown. “The combination of monetary policy stance and macroprudential measures by the central bank may have contributed to the demand slowdown,” it said. The RBI has kept interest rates steady for nearly two years as it wanted to bring down inflation durably around its target of four per cent.
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Despite calls for rate cuts to support growth amid high inflation, the central bank has kept interest rates unchanged for 11 straight policy meetings. The report said newer risks have emerged for the next financial year starting April 1, 2026, such as uncertain global trade growth and a stronger US dollar.
US President-elect Donald Trump has threatened nations, including India, with higher tariffs on imports, raising risks of a global trade war after he takes office on January 20. Trump's election victory has also fuelled a run-up in the dollar and US yields. However, risks to global growth are building up amid the US's threats of higher tariffs.
"Sustaining growth will require a deeper commitment from all economic stakeholders as newer uncertainties mostly driven by global factors have emerged," said the report. Elevated stock markets continue to pose a big risk, it said, adding that the strength of the US dollar and a rethink on the path of policy rates in the US have put emerging market currencies under pressure.
The policies of advanced countries have weakened emerging market currencies and lowered their degrees of freedom. “This will weigh on the minds of monetary policymakers in emerging economies, India included,” said the report. However, the finance ministry's report still maintained that India’s growth outlook in 2025/26 (FY26) and the coming years is bright in terms of domestic economic fundamentals.
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