The economy is expected to grow by about 6.5% in fiscal year 2025 due to the threat of global uncertainty: Govt

The government said India is expected to grow at a rate of 6.5 percent in the fiscal year 2024-25, which is closer to the lower end of its forecast of 6.5-7 percent, as global uncertainty poses a threat to domestic growth.

The growth outlook for the October-December period looks bright, with rural demand remaining resilient and urban demand rebounding in the first two months of the quarter, according to the Finance Ministry’s monthly economic report released on December 26.

“India’s real GDP grew by 5.4 per cent during the second quarter of FY25 and 6 per cent in the first half of FY25. The slowdown was mainly concentrated in some sections of manufacturing compared to the previous quarter. On the demand side, private final consumption spending rose At constant prices (2011-12) by 6 per cent in Q2 FY25, resulting in a growth of 6.7 per cent in H1 FY25. In the November 2024 Monthly Economic Review, consumption remained strong, with its share in GDP (at current prices) rising from 60 per cent in H1 FY24 to 61.2 per cent in H1 FY25.

India confirmed that its economy will grow at a global rate of between 6.5 and 7% despite the difficult environment. She added that the growth outlook is expected to be better in the October-March period compared to the first six months of the fiscal year.

“The combination of the monetary policy stance and the macroprudential measures taken by the central bank may have contributed to the slowdown in demand,” the report said.

Economic inflation

Retail inflation fell to 5.5% in November 2024 from 6.2% in October 2024, driven by lower food price inflation and core inflation. The report added that food inflation fell to 9 percent in November from 10.9 percent in October, mainly driven by a decline in vegetable inflation, although it was still in the double digits.

Moreover, government measures to prevent hoarding of key pulses and sale of subsidized pulses under the Bharat brand were effective, with pulse inflation falling by 200 basis points to 5.4 per cent in November compared to October. On the other hand, the inflation rate in the “Oils and Fats” group rose from 9.6 percent in October to 13.3 percent in November, as global inflation in vegetable oils based on the FAO index reached double digits.

Inflation in the fuel and light group remained in deflationary territory for the 15th consecutive month. The core inflation rate also fell slightly to 3.7% in November 2024.

Overall, headline inflation in FY2025 (April-November) was lower at 4.9% compared to 5.5% in the corresponding period of the previous year. Core inflation was 3.4 percent, 1.4 percent lower than the same period last year. The government said food inflation rose to 8.3% from 6.9% in FY24 (April-November).

Projection for H2FY25

There are good reasons to believe that the growth outlook in the second half of FY25 is better than that of the first half. At the same time, the possibility that structural factors also contributed to the slowdown in the first half should not be ruled out. He added that the combination of the monetary policy stance and the macro-prudential measures taken by the central bank may have contributed to the slowdown in demand.

On the demand side, rural demand remains resilient, as evidenced by 23.2 percent and 9.8 percent growth in three-wheeler sales and domestic tractor sales, respectively, from October to November 2024. Urban growth, along with passenger car sales. Recording a year-on-year growth of 13.4 percent in the period from October to November 2024, domestic air passenger traffic witnessed strong growth. As a result, we expect the economy to grow by about 6.5% in real terms in FY25, the government said.

Looking to fiscal year 2026, new uncertainties have emerged. Global trade growth appears more uncertain than before. Rising stock markets still pose a significant risk. He added that the strength of the US dollar and the rethinking of the course of official interest rates in the United States put emerging market currencies under pressure.