India’s Economic Growth Projections for FY2025-26: Bank of Baroda

Recent forecasts indicate that India’s economy is poised for significant growth in the fiscal year 2025-26, with projections ranging from 6.6% to 6.8%. This anticipated expansion underscores India’s resilience and its pivotal role in driving regional economic development.

Bank of Baroda’s Projection

According to a report by Bank of Baroda, the Indian economy is expected to grow by 6.8% in FY2025-26. This optimistic outlook is attributed to robust high-frequency indicators, including increased air passenger traffic, a rise in the services Purchasing Managers’ Index (PMI), and higher Goods and Services Tax (GST) collections. Additionally, enhanced rabi crop sowing is projected to bolster agricultural growth, providing a solid foundation for the economy.

United Nations’ Forecast

In its ‘World Economic Situation and Prospects 2025’ report, the United Nations Department of Economic and Social Affairs (UN DESA) projects India’s GDP growth at 6.6% for FY2025-26. This growth is expected to be driven by strong private consumption and investment. The report also highlights that the South Asian region is projected to grow by 5.7% in 2025 and 6% in 2026, largely due to India’s strong performance and economic recovery in other countries.

Comparative Analysis

While both projections are optimistic, the slight variance between the Bank of Baroda’s 6.8% and the UN’s 6.6% forecasts may be due to differing assessment methodologies and considerations of global economic factors. Notably, the National Statistics Office (NSO) has provided a more conservative estimate, projecting GDP growth at 6.4% for 2024-25.

Key Growth Drivers

Private Consumption and Investment: Both reports emphasize the role of strong private consumption and investment in driving economic growth.

Agricultural Sector: Enhanced rabi crop sowing is expected to boost agricultural output, contributing positively to the GDP.

High-Frequency Indicators: Metrics such as increased air passenger traffic, a rise in services PMI, and higher GST collections indicate robust economic activity.

Potential Risks

Despite the positive outlook, potential risks include global economic headwinds, such as rising oil prices and protectionist trade policies, which could impact growth projections.

Summary of the news