India’s GDP Growth Forecast Revised

The Federation of Indian Chambers of Commerce and Industry (FICCI) has revised its GDP growth forecast for India, projecting a growth rate of 6.4% for the financial year 2024-25. This marks a significant decrease from the previous estimate of 7.0% made in September 2024. The growth rate for the current financial year, 2023-2024, was recorded at a robust 8.2%. This article delves into the implications of this revision, the sector-wise outlook, and the anticipated impact of the upcoming Union Budget.

Economic Outlook for 2024-25

FICCI’s latest economic outlook, released in December 2024, reflects a cautious optimism regarding the Indian economy. The forecast indicates that consumer spending is expected to rise, bolstered by positive trends in agriculture and rural consumption. Government-led investments in infrastructure, housing, and logistics are anticipated to drive growth. However, private capital expenditure may remain subdued due to ongoing geopolitical uncertainties and inconsistent domestic demand.

The agricultural sector, including allied activities, is projected to grow at 3.6% in FY 2024-25. Meanwhile, the industrial and services sectors are expected to expand by 6.3% and 7.3%, respectively. Economic activity is likely to pick up in the latter half of the fiscal year, driven by increased public capital expenditure, festive demand, and the normalization of industrial activities following the monsoon season. Additionally, inflation is projected to ease, with the consumer price index (CPI)-based inflation forecasted at 4.8% for 2024-25, aligning with the Reserve Bank of Indiaโ€™s expectations. This moderation in inflation, particularly food inflation, is expected to provide relief to consumers who have faced rising costs over the past year.

Sector-Wise Growth Projections

The FICCI report highlights a varied outlook across different sectors of the economy. The agricultural sector is expected to see moderate growth, while the industrial and services sectors are projected to experience more robust expansion. The anticipated growth in the industrial sector is particularly noteworthy, as it is expected to benefit from increased government spending on infrastructure projects. This spending is crucial for stimulating economic activity and creating jobs.

Consumer spending is also set to rise, driven by improved rural consumption and agricultural performance. The report emphasizes that the latter half of the fiscal year could witness a surge in economic activity, fueled by festive demand and a rebound in industrial operations. However, the report cautions that private sector investment may lag due to ongoing global uncertainties and fluctuating domestic demand.

Moreover, the report underscores the importance of attracting foreign investment, particularly in manufacturing, electronics, and pharmaceuticals. As global supply chains shift away from China, India has a unique opportunity to position itself as a favorable destination for foreign direct investment. Targeted policies will be essential to enhance India’s manufacturing competitiveness and capitalize on these emerging opportunities.

Implications for the Upcoming Union Budget

With the Union Budget for 2025-26 set to be announced on February 1, economists are urging the government to focus on reviving private consumption. Recommendations include reviewing tax structures to increase disposable income, enhancing welfare programs like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and Pradhan Mantri Awas Yojana (PMAY), and boosting investments in agriculture and rural infrastructure.

To manage inflation effectively and improve productivity, the survey suggests enhancing cold storage capacity, streamlining supply chains, and reducing food wastage. These measures are crucial for ensuring that the benefits of economic growth reach the broader population. Furthermore, the Indian economy stands to gain from supply chain realignments and emerging opportunities in sectors like electronics and renewable energy, despite facing short-term challenges from global trade policies and geopolitical tensions.

 


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