 "Economic growth")
Rating agency CRISIL on Wednesday raised its economic growth forecast for India in the next financial year (FY25) to 6.8 per cent from 6.4 per cent estimated earlier, citing higher growth momentum.
In its India Outlook report, it, however, said growth will moderate in FY25 from 7.6 per cent in the current financial year (FY24) as higher interest rates and lower fiscal impulse will temper demand and the net tax impact will normalise.
“The fiscal impulse [next year] will be lesser because of the need to reduce the fiscal deficit to 5.1 per cent of GDP next fiscal according to the glide path presaged. However, the nature of government spending will provide some support to the investment cycle and rural incomes,” CRISIL said in a statement.
On the inflation front, the rating agency expects the softening to continue in the next financial year on the back of healthier agriculture output that tames food inflation, and benign oil and commodity prices.
The report also expects the Indian economy to grow at an average rate of 6.7 per cent till the end of this decade.
India will become an upper middle-income country and nearly double its economy to $7 trillion, piggybacking on significant private investments in emerging sectors, continuing government spending on infrastructure build-up, ongoing reforms push and efficiency gains from increasing digitisation and physical connectivity, it said.
By FY31, both cylinders of the economy - manufacturing and services - are expected to fire, yielding a sturdier growth path.
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CRISIL chief economist Dharmakirti Joshi said there is ample opportunity for both manufacturing and services to cater to domestic and global demand.
“We project manufacturing and services to grow 9.1 per cent and 6.9 per cent respectively, between fiscal 2025 and 2031. Despite some growth catch-up by manufacturing, services will remain the dominant driver of India’s growth,” he added.
CRISIL, in its note, said capex in the country has been driven by the household sector and the infrastructure build-out bankrolled by the central and state governments over the past three fiscal years.
“Going forward, the industrial sector is expected to pick up pace, with investments flowing towards both conventional and emerging sectors, even as infrastructure capex maintains momentum," it said.
The rating agency expects overall capex to grow 9-11 per cent annually over the next four financial years, with a good mix of the industrial and infrastructure segments. Private capex is expected to rise to Rs 6.5 trillion annually on average between FY24 and FY28, from Rs 3.9 trillion in the preceding five years.
CRISIL said emerging sectors such as electric vehicles (EVs), semiconductors and electronics will dominate investments, driven by market dynamics and global supply-chain diversification.
Miren Lodha, director, CRISIL expects a majority of the private capital expenditure in the emerging sectors to be led either by large companies in India or their global counterparts.
He said this could translate into a larger dependence on bonds than bank-based funding, which is a trend with large companies. Of the private capex expected in other conventional sectors, Lodha expects it to be a mix of large-size and mid-size companies
On India's upcoming elections and what could or should be a focus area in terms of policy, Joshi said: "It could be a thrust on what is needed for the animal spirits of the private sector to go full throttle."
For FY25, Lodha expects borrowing from sectors such as steel, cement, auto value chain, and pharma to rise, but he maintained that he does not expect a sharp increase in debt burden.
