India’s GDP Growth Forecast Adjusted to 6.3% Amid Private Sector Developments
India’s economy is projected to experience a slowdown in growth during the fiscal year 2024-25, according to a recent survey conducted by Reuters among economists. The survey indicates that the country’s GDP is expected to expand at an average rate of 6.3%, a slight decrease from earlier forecasts. This anticipated growth aligns with last year’s figures but highlights a significant decline from the 9.2% growth recorded in the previous fiscal year. Economists attribute this slowdown to various factors, including stagnant private sector investment and uncertainties surrounding U.S. tariffs.
Economic Growth Projections
The Reuters survey, conducted between April 15 and 24, involved 54 economists who provided insights into India’s economic outlook. While the projected growth rate of 6.3% matches last year’s performance, it represents a downgrade from the 6.5% forecast made in March. This figure is marginally above the International Monetary Fund’s (IMF) recent estimate of 6.2%. The anticipated slowdown raises concerns about the economy’s ability to generate sufficient high-paying jobs, especially for its growing youth population. Despite government-led infrastructure investments, private sector capital expenditure has stagnated over the past decade, indicating that India is not operating at its full potential.
Impact of U.S. Tariffs
The proposed 26% U.S. tariff on Indian imports, which is currently suspended for a 90-day period starting April 10, has added to the uncertainty surrounding India’s economic prospects. Economists have noted that these tariffs have negatively impacted business sentiment, with many expressing concerns about making investment decisions in such an unpredictable environment. Kunal Kundu, an economist at Société Générale, emphasized the need for domestic policies to address the root causes of economic struggles, particularly for the middle class. He suggested that the current tariff situation presents an opportunity for India to push for structural reforms akin to those initiated during the 1991 liberalization campaign.
Monetary Policy and Inflation
In light of the economic challenges, the Reserve Bank of India (RBI) is expected to continue its moderate rate-cutting cycle. The central bank is likely to reduce interest rates by 25 basis points in June, bringing the rate down to 5.75%, with a potential conclusion of the easing cycle at 5.50% in August. Dhiraj Nim, an economist at ANZ, noted that the recent drop in consumer inflation, which has remained below the 4% medium-term target for two consecutive months, has created more room for monetary policy support aimed at fostering growth. For the fiscal year 2024-25, consumer inflation is projected to average 4.0%, with a slight increase to 4.3% anticipated in the following fiscal year.
World Bank’s Revised Growth Forecast
The World Bank has also revised its growth forecast for India, projecting a slowdown from 6.5% in FY2024-25 to 6.3% in FY2025-26. This adjustment reflects concerns that the benefits of monetary easing and regulatory streamlining may be offset by global economic weaknesses and ongoing policy uncertainties. The World Bank’s assessment indicates that India’s fiscal performance has not met expectations, primarily due to reduced private sector investments and unmet public capital expenditure goals. As the global economic landscape continues to evolve, India’s ability to navigate these challenges will be crucial for its long-term growth ambitions.
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