Mumbai: India’s GDP growth is projected to hit 6.5 per cent in the fiscal 2025 (FY25), according to recent analyses by ICRA. The nation saw its GDP rise to an 8.4 per cent high in the third quarter of FY24, climbing from 8.1 per cent in the preceding quarter, despite a decline in gross value added (GVA) growth from 7.7 per cent to 6.5 per cent. This increase was notably driven by a significant 32 per cent surge in net indirect taxes amid reduced subsidy outlays by the Government of India and state governments.
The National Statistical Office anticipates a slowdown in GDP and GVA growth to 5.9 per cent and 5.4 per cent respectively in Q4 FY24, narrowing the gap between them. This forecast aligns with expectations of a decrease in government subsidy outgo and an increase in indirect taxes, leading to a smaller disparity between GDP and GVA growth rates.
The interim budget for FY25 suggests a modest rise in indirect tax growth and a sharp decrease in subsidy outlays, potentially slowing net indirect tax growth compared to FY24. This adjustment is anticipated to lessen the gap between GDP and GVA growth in FY25, as per ICRA.
Urban consumption remains strong in FY24, with a positive outlook for FY25, supported by better consumer sentiment and expected inflation decreases. However, stricter personal loan and credit card regulations may impact discretionary spending.
Government revenue expenditure is predicted to increase modestly in Q4 FY24, while capital expenditure might see a contraction, affecting GDP growth for the quarter. For FY25, on-budget capital expenditure growth is expected to rise for the centre and major states, though revenue expenditure growth remains conservative.
Despite the global economic slowdown, India’s exports are expected to remain steady in the first half (H1) of FY25, with potential improvement in the latter half as global demand picks up. However, merchandise exports are not projected to significantly contribute to GDP growth in FY25.
ICRA estimates a subdued GDP growth of 5.5-5.9 per cent in H1 FY25, improving to 7.1-7.2 per cent in H2. The GVA growth is projected at 6.2 per cent for FY25, with the GDP-GVA growth gap expected to narrow. Factors such as El Nino’s lingering effects and reduced economic activity during election periods may dampen growth in the first half of FY25.
