India's GDP Growth: 6.6% Forecast for FY25 Amid Resilience and Revival
India's economic growth trajectory remains optimistic as the country’s GDP is projected to expand by 6.6% in FY25, according to the Reserve Bank of India (RBI). Released in the December 2024 Financial Stability Report (FSR), the RBI highlights key drivers like rural consumption revival, government investment, and robust service exports, paving the way for a resilient recovery despite global uncertainties.
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Slow Start, Promising Finish
The first half of FY25 saw GDP growth moderate to 6% year-on-year, down from 8.2% and 8.1% in the previous fiscal’s halves. Contributing factors included election-related uncertainties, erratic rainfall, and geopolitical disruptions. However, the latter half of FY25 is expected to witness a rebound fueled by a combination of public consumption, government-led infrastructure spending, and a revival in export demand
Domestic Consumption and Infrastructure Development: Key Growth Catalysts
Both the RBI and Deloitte emphasized the pivotal role of domestic consumption and infrastructure expansion. Deloitte India Economist Rumki Majumdar pointed out that government initiatives in infrastructure, digitization, and foreign direct investment (FDI) attraction are enhancing efficiency and boosting growth prospects. Deloitte projects India’s growth to reach 6.5%-6.8% in FY25, with an uptick to 6.7%-7.3% in FY26.
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Rural Consumption and Services Exports Shine
A revival in rural demand, supported by a bumper kharif harvest, is expected to bolster consumption. Additionally, the service sector—particularly IT and financial services—continues to drive export growth. This aligns with India’s broader strategy of leveraging high-value manufacturing and services to sustain its export momentum.
Inflation Under Watch Amid Mixed Signals
The RBI highlighted a potential easing of inflation due to robust agricultural output. However, the frequency of extreme weather events poses risks to food price stability. Geopolitical tensions and fragmented global supply chains could further exacerbate inflationary pressures, underscoring the need for cautious economic management.
Banking Sector Bolsters Economic Stability
India’s banking sector remains robust, with declining non-performing assets (NPA) and improved profitability. The gross NPA ratio has hit a 12-year low of 2.6%, while metrics like Return on Assets (RoA) and Return on Equity (RoE) are at decadal highs. Stress tests validate the resilience of banks, mutual funds, and clearing corporations even under adverse scenarios.
Outlook for FY25 and Beyond
As India transitions into the second half of FY25, the economy is expected to benefit from high consumer and business confidence. With global headwinds persisting, the nation’s structural growth drivers—such as infrastructure expansion, digitization, and service sector dominance—remain key to sustaining momentum.India’s growth narrative reflects resilience, adaptability, and strategic foresightdespite global macroeconomic uncertainties. The 6.6% forecast for FY25 signals recovery and the strengthening of economic fundamentals.
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