Ind-Ra Raises FY25 GDP Growth Forecast to 7.5%

India Ratings & Research (Ind-Ra) has increased its forecast for India’s GDP growth in FY25 to 7.5%, up from the previous estimate of 7.1%. This revised projection surpasses the RBI’s forecast of 7.2% and the Finance Ministry’s Economic Survey estimate of 6.5-7%. The upward revision is attributed to expected improvements in consumption demand driven by government policies and increased capex.

Key Drivers

Government Initiatives: The union budget’s focus on enhancing agricultural and rural spending, improving credit access for MSMEs, and incentivizing employment is anticipated to boost consumption demand across various income brackets.

Corporate and Bank Balance Sheets: A reduction in corporate and bank leverage, alongside a potential rise in private corporate capex, is expected to support economic growth.

Consumption Trends

Private Final Consumption Expenditure (PFCE): Projected to rise to 7.4% in FY25, a notable increase from 4% in FY24. The growth is expected to be more inclusive, benefiting lower-income households due to above-normal monsoon conditions and budget measures.

Inflation and Real Wages

Food Inflation: Remains a risk but is expected to be offset by lower retail inflation in FY25, which should aid in real wage growth.