FICCI Projects 7% GDP Growth for India in 2024-25, Expects Repo Rate to Moderate by Fiscal Year End

Economic Growth Projections

The Federation of Indian Chambers of Commerce and Industry (FICCI) has projected an annual median GDP growth for India at 7.0% for the fiscal year 2024-25. This forecast, derived from the latest round of FICCI’s Economic Outlook Survey conducted in July 2024, presents a growth estimate range from 6.6% to 7.5%. 

Despite ongoing global economic challenges, India's growth trajectory remains robust, positioning it among the fastest-growing economies in the world.

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Sectoral Growth Estimates

Agriculture and Allied Activities: The median growth forecast for agriculture and allied activities is set at 3.7% for 2024-25. This marks a significant improvement from the 1.4% growth observed in the previous fiscal year. The withdrawal of the El Niño effect and the India Meteorological Department's (IMD) prediction of a normal southwest monsoon contribute to this optimistic outlook.

Industry and Services: The industry sector is expected to grow by 6.7%, while the services sector is projected to achieve a growth rate of 7.4% during the current fiscal year. These estimates, although lower compared to the previous fiscal year's growth rates of 9.5% and 7.6%, respectively, indicate sustained investment momentum driven by government capital expenditure and increased private sector participation.

Inflation and Monetary Policy

Inflation Forecast: Consumer Price Index (CPI)-based inflation is anticipated to moderate, with a median forecast of 4.5% for 2024-25, within a range of 4.4% to 5.0%. This aligns with the Reserve Bank of India's (RBI) latest projections. Headline retail inflation reached a four-month high of 5.1% in June 2024, primarily due to rising food prices, including cereals, fruits, and milk products, along with double-digit inflation in pulses and vegetables.

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Repo Rate Outlook: Economists predict the policy repo rate to moderate to 6% by the end of the fiscal year, with an estimated range of 5.5% to 6.25%. The RBI is expected to maintain a cautious approach, closely monitoring inflation trends. A potential rate cut may be considered in the latter part of the fiscal year.

Trade and Current Account

• Export and Import Projections: The survey forecasts exports to reach USD 455.0 billion and imports to hit USD 725.0 billion for 2024-25. The current account deficit (CAD) as a percentage of GDP is projected at 1.0% for the fiscal year. Economists also expect the USD/INR exchange rate to be 83.5 by the end of the current financial year.

Policy Continuity and Reforms

Participants of the FICCI survey anticipate the continuation of existing policies and further momentum in reforms being undertaken by the government. These expectations are tied to the upcoming Union Budget 2024-2025, which is likely to play a crucial role in sustaining economic growth and addressing key challenges.

Conclusion

FICCI's optimistic projections for India's economic growth in 2024-25 reflect the resilience and potential of the Indian economy. With stable agricultural production, robust industry and services growth, and a moderated inflation outlook, India is well-positioned to sustain its growth momentum. Continued policy support and structural reforms will be essential in navigating the challenges and leveraging the opportunities in the upcoming fiscal year.

Also Read: India's Growth Shines as IMF Raises FY25 GDP Forecast; US Prospects Dim in Global Slowdown