India’s real GDP growth expected to moderate to 7% and 6.8% in FY25 and FY26: UBS

UBS anticipates a moderation in India’s real GDP growth for fiscal years 2025 and 2026, projecting rates of 7% and 6.8%, respectively. Despite this, India is expected to maintain its position as one of the fastest-growing global economies. The report highlights the continuation of growth momentum in the first three quarters of fiscal year 2024, driven by cyclical recovery and structural improvements.

GDP Growth Projection

• Real GDP growth expected to moderate to 7% and 6.8% in FY25 and FY26 respectively.
• Positive surprises noted in India’s GDP growth, averaging above 8% in the first three quarters of FY2024.
• Expectation of moderation attributed to global factors such as weaker growth and local factors like softness in public capex.

Sector-wise Analysis

• Anticipated moderation in investment-led growth due to lower public capex.
• Gradual recovery expected in consumption growth driven by rural growth recovery, relying on expectations of a normal monsoon as projected by IMD.

Equity Market Outlook

• Expectation of near-term volatility in the Indian equity market due to elevated geopolitical and economic risks.
• Manageable downside risks amid supportive domestic macro and micro environment.
• Reversal of rate cycle could provide valuation support as equity risk premium falls.
• Investors advised to utilize steep market corrections as buying opportunities, favoring domestic economy linked sectors for long-term structural growth opportunities.