 "Economic growth, GDP")
India's growth is expected to moderate to 6.5 per cent in the financial year 2024-25 from 7.3 per cent estimated by the first advance estimates, said India Ratings and Research on Thursday. The forecast is a notch below the Reserve Bank of India's estimate of 7 per cent GDP growth in FY25.
The credit rating agency in its report said that despite the base effect, the sequential GDP growth indicates that the economic recovery is on track due to the sustained government capital expenditure, healthy corporate performance, deleveraged corporate sector balance sheet, continued softness in global commodity prices, and the prospect of a new private corporate capex cycle.
Besides, the rating agency upped its FY24 forecast to 6.9 per cent from 6.7 per cent projected earlier, as it noted that a build-up in the economy owing to prevailing weather conditions in north India would push agriculture and consumption demand.
Speaking to the media, Sunil Kumar Sinha, principal economist, India Ratings said that private corporate sector investment has been down and out for nearly a decade but the lead indicators suggest that at the current juncture the private corporate sector is once again becoming more bullish about investments.
“It may or may not be happening on the ground in the way we would like it to, but some flavour of that has already started becoming clearer at least in terms of intentions and the way they (corporates) are now approaching banks to finance their projects," Sinha added.
In terms of inflation, India Ratings' forecast pegged headline retail inflation at 4.8 per cent, 30 basis points higher than the Reserve Bank of India's (RBI) projection of 4.5 per cent.
"For the first two quarters, our projections are the same as the RBI. The major difference is in the third quarter, where the RBI expects inflation to go up to 4.6 per cent. Our forecasts suggest 5.5 per cent," said Devendra Pant, India Ratings' chief economist.
However, the rating agency flagged trade distortions and geopolitical fragmentation as risks to exports, noting that skewed consumption demand by upper-income households could also have an impact.
On the consumption side, India Ratings expects private final consumption expenditure to grow by 6.1 per cent in FY25, up from 4.4 per cent in FY24.
However, the agency's economists caution that the current consumption trend – which is skewed in favour of goods and services purchased largely by those in the upper-income bracket – is not sustainable as for sustained growth in consumption, demand for goods and services consumed by households belonging to the lower income bracket also has to pick up.
