India Ratings Projects 7.1% GDP Growth For India In FY25

India Ratings and Research on Monday revised upward the country's GDP growth estimate for FY25 to 7.1% from 6.5% earlier. The projection is marginally higher than the Reserve Bank's estimate of 7%.

In a statement, the domestic rating agency said strong support from the sustained government capex, deleveraged balance sheets of corporate and banking sector, and the incipient private corporate capex cycle make it revise its estimate.

It said that factors that may constrain growth include consumption demand not being broad based and the headwinds faced by exports due to sluggish growth globally.

The agency said it expects the growth in private final consumption expenditure to jump to 7% in FY25, up from 3% in FY24, and added that this will be a three-year high.

'Current consumption demand is highly skewed, as it is driven by the goods and services largely consumed by the households belonging to the upper income bracket,' it said, adding that rural consumption is weak.

Above normal monsoon, jump in wheat procurement by Food Corporation of India at 37 million tonnes versus 26 million tonnes in FY24 will help the consumption story, it said.

'Sustained real wage growth of the households belonging to the lower income bracket is an imperative for a sustainable and broad-based recovery in consumption demand,' it said.

On the capex front, it said private sector activity has remained down for several years but added that a new cycle is in the offing as seen from the increase in the project loans sanctioned by lenders.

The headline inflation will moderate in FY25, but the Reserve Bank will remain vigilant, the agency said.