India's Real GDP Growth to Ease to 6.8% in Fiscal 2025
- 07 Mar 2024
Recently, Crisil predicted India's real GDP growth to slow down to 6.8% in fiscal 2025 due to higher interest rates and lower fiscal impulse.
Key Points
- GDP Growth Projection: Crisil Ratings predicts India's real GDP growth to decrease to 6.8% in fiscal 2025 after expanding by 7.6% in the current fiscal.
- Moderation Factors: The slowdown in economic growth is attributed to higher interest rates and lower fiscal impulse, which will dampen domestic demand.
- Export Impact: Uneven growth in key trade partners is expected to limit healthy export recovery, contributing to the moderation of economic growth.
- Reserve Bank of India Projection: The Reserve Bank of India (RBI) has projected the real GDP growth for 2024-25 at 7%.
- Monetary Policy Impact: Rate hikes by the RBI's Monetary Policy Committee (MPC) are expected to continue weighing on demand next fiscal, following a series of increases between May 2022 and February 2023.
- Regulatory Actions: Regulatory measures to control unsecured lending, such as increased risk weights on bank exposures, will affect credit growth.
- Fiscal Impulse: Reduction in fiscal deficit to 5.1% of GDP next fiscal will lead to lesser fiscal impulse, although government spending will support the investment cycle and rural incomes.
- Inflation Outlook: Inflation is expected to soften further in fiscal 2025 due to healthier agriculture output and benign oil and commodity prices.
- Growth Trajectory: India's economy is projected to inch closer to the $7 trillion mark by fiscal 2031, becoming the third-largest economy globally and achieving upper middle-income status.
- Challenges Ahead: Geopolitical uncertainties, global indebtedness, uneven economic recovery, climate change, and technological disruptions pose near- and medium-term challenges.
- Supporting Factors: Despite challenges, domestic structural factors and cyclical levers will continue to support growth.
