India set for resilient growth in 2025 driven by urban consumption: S&P

For 2025-26 and 2026-27, S&P Global Ratings pegged India's GDP growth forecast at 6.7 per cent and 6.8 per cent, respectively, down 20 basis points from its previous estimates

The Indian economy is set for resilient growth in 2025 on the back of strong urban consumption, steady services sector growth, and ongoing investment in infrastructure, S&P Global Ratings has said in its latest India Outlook.

 

The global ratings agency kept the FY25 gross domestic product (GDP) growth outlook unchanged at 6.8 per cent amid slower fiscal impulse tempering urban demand.

 

The ratings agency said that higher labour force participation, infrastructure and technology improvement, and stronger public and household balance sheets can support economic growth in India.

 

For 2025-26 and 2026-27, S&P Global Ratings pegged India's GDP growth forecast at 6.7 per cent and 6.8 per cent, respectively, down 20 basis points (bps) from its previous estimates.

 

 

The GDP growth print for June-September quarter of FY25 was weaker than expected at 5.4 per cent.

 

The global ratings agency expects the Reserve Bank of India (RBI) to ease monetary policy modestly during 2025 as inflationary pressures recede.

 

“There are various challenges for the economy, including post-pandemic weakness in the public sector and household balance sheets, a highly competitive global manufacturing environment, and weak agriculture sector growth,” Vishrut Rana, economist, S&P Global Rating said.

 

Rana said that better urban infrastructure and improved quality of jobs can crowd in labour force participation.

 

Department of Economic Affairs (DEA) secretary Ajay Seth had recently said action is being taken to revive growth in the next two quarters and several high frequency data in October are pointing towards a positive trend.

 

Several agencies reduced their growth forecasts for FY25, following the surprise seven-quarter low print of GDP growth in Q2.

 

UBS has revised GDP growth forecast for FY25 to 6.3 per cent compared to 6.7 per cent estimated previously.

 

The financial services firm is expecting to see a cyclical recovery in H2 of FY25. This is due to festival and marriage season demand, improved rural sentiment and likely improvement in overall government spending.

 

Citing sluggishness in expenditure in both states and the Centre for slowdown in growth, a SBI research report said that it was expecting growth numbers to stay between 6 and 6.5 per cent in FY25. “Due to tied conditionalities on expenditure of states we are not expecting any uptick in H2 expenditure,” the report said.

 

Elara Securities said it was treading cautiously towards the second half of this financial year, while revising its FY25 growth estimates by 30 bps to 6.5 per cent. This is due to low expectation of a significant turnaround in demand in the third quarter and the likelihood of capital expenditure undershooting the target this financial year.