India's GDP to grow at around 6.75-6.8% in FY25, says Bank of Baroda

The International Monetary Fund has projected the Indian economy to grow at 6.7%

The Bank of Baroda (BoB) has projected India’s gross domestic product (GDP) to grow at around 6.75 to 6.8 per cent in FY25 and 6.8 per cent for the current financial year in a report released on Friday.

“The Indian economy is relatively better off than its global counterparts on the back of resilience reflected through domestic demand and sustained government thrust on capital expenditure,” the report said.

The International Monetary Fund (IMF) has projected the Indian economy to grow at 6.7 per cent for the current fiscal, upgrading the estimates by 40 basis points from its previous forecast in October 2023. The World Bank expects the Indian economy to clock a growth of 6.3 per cent in FY24 and 6.4 per cent in FY25, led by strong domestic demand, growing infrastructure spending, along with robust private sector credit growth. The Reserve Bank of India (RBI) has pegged the country’s growth at 7 per cent in FY24.

 

BoB expects the growth for the third quarter of the current financial year to moderate by 6.4 per cent against an increase of 7.6 per cent in the previous quarter due to subdued growth in agriculture and industry sectors.

The report projected a growth of 2.1 per cent for the agriculture sector in the third quarter of FY24, which is slower than initially anticipated, after the first Advance Estimates for kharif crops showed lower food grain production this year.

“Rural demand is likely to be slower as has been reflected by some moderation in tractor and two-wheeler sales. Uptick in e-way bill generations in January 2024 will provide some support to services,” the BoB report said.

The industrial sector, after registering a 13.2 per cent growth in the second quarter, is expected to grow at 8 per cent in Q3FY24, the report said.

On the other hand, the construction sector is expected to grow at a solid pace on the back of the improvement in steel and cement output. This is further supported by steady demand push led by residential housing and sustained thrust on government capital expenditure, the report said.

“For services, a delayed festive surge and the World Cup event has brought upon a broad-based improvement in Q3 at 6.7 per cent compared to 5.8 per cent in Q2,” the report said. It also added that the nominal GDP growth is expected to remain subdued given the moderation in prices, but with the capital expenditure push, government spending is likely to grow at a healthy pace in the coming quarters.