A Closer Look
The latest FICCI Economic Outlook Survey paints a picture of moderate growth for India in the upcoming fiscal year. The median forecast predicts a GDP growth of 6.4%, slightly lower than the 7.0% estimated in the previous survey. This reflects a slowdown compared to the robust 8.2% growth achieved in 2023-24.
The agricultural sector, including allied activities, is expected to grow by 3.6%, while the industry and services sectors are projected to expand by 6.3% and 7.3%, respectively. The second half of the fiscal year is anticipated to see a pick-up in economic activity, fueled by increased public capital expenditure, festive demand, and the normalization of industrial activity post-monsoon.
The median inflation forecast based on the Consumer Price Index (CPI) for 2024-25 is 4.8%, aligning with the Reserve Bank of India's projection. Consumer spending is expected to pick up, driven by improvements in the agricultural sector and easing food inflation. Monetary easing by the RBI could further stimulate consumption.
The government's continued focus on capital expenditure is seen as a key growth driver. Infrastructure investments, particularly in roads, housing, logistics, and railways, are expected to maintain momentum. However, concerns remain about subdued private sector investment due to a cautious outlook and geopolitical uncertainties.
Economists expressed cautious optimism in light of external headwinds. Donald Trump's policies may cause short-term disruptions, particularly in exports, foreign capital flows, and input costs. Trade tensions and US interest rate reductions could also impact emerging markets like India.
On the positive side, India stands to benefit from shifts in global supply chains, particularly in electronics manufacturing and pharmaceuticals. The country's role as a manufacturing hub for sectors like semiconductors and automotive components could attract foreign direct investment.
Economists recommend focusing on reviving private consumption, boosting agricultural productivity, improving rural infrastructure, and enhancing agricultural value chains. Continued investments in welfare programs and infrastructure are also suggested. Additionally, reforms in land, labor, and the financial sector are necessary to improve the ease of doing business.
Looking to 2025, global growth is expected to maintain a positive trajectory, tempered by caution. Softening prices, monetary policy easing, and strong growth in interest-sensitive sectors are expected to support growth. However, substantial risks persist, including rising geopolitical tensions, trade policy uncertainties, and climate-induced disruptions.