India Ratings raises GDP growth forecast to 7.5% for FY25

India GDP growth forecast: India Ratings & Research (Ind-Ra) has revised its GDP growth forecast for the current fiscal year, increasing it to 7.5 per cent from the earlier projection of 7.1 per cent. The upward revision is attributed to expectations of improved consumption demand.

The agency highlighted that the ongoing growth momentum, driven by government capital expenditure, deleveraged balance sheets of corporations and banks, and the early stages of a private corporate capex cycle, has received additional support from the union government's budget. The budget aims to enhance agricultural and rural spending, improve credit delivery to MSMEs, and incentivize job creation.

"Ind-Ra believes these measures would help broaden the base of consumption demand," the rating agency stated while updating its GDP growth estimate for FY25 to 7.5 per cent. This forecast is higher than the Reserve Bank of India's (RBI) projection of 7.2 per cent growth for FY25 and the Finance Ministry's Economic Survey estimate of 6.5-7 per cent.

Ind-Ra expects that Private Final Consumption Expenditure (PFCE) will grow to a three-year high of 7.4 per cent in FY25, compared to 4 per cent in FY24. However, the consumption demand is currently skewed towards goods and services primarily consumed by upper-income households. The agency expects an above-normal monsoon, combined with measures announced in the union budget, to correct this imbalance by boosting demand for goods and services among rural and lower-income households.

While food inflation remains a concern, Ind-Ra predicts that retail inflation in FY25 will average lower than in FY24, supporting real wage growth.

(With PTI inputs)