India's GDP growth expected to moderate to 6.5% in FY25: ICRA

This projection will be achieved on the back of continued weakness in rural demand, slowdown in government capital expenditure during the election period, tepid external demand and diminishing benefits owing to the deflation in commodity prices, according to domestic rating agency ICRA.

However, the pace of expansion in economic activity is expected to pick up in the second half (H2).

The average consumer price index (CPI)-based inflation is projected to ease to 4.6 per cent in FY25 from the 5.3 per cent estimated for FY24, largely in line with the central bank’s monetary policy committee’s projections, ICRA noted.

ICRA foresees a rate cut cycle limited to 50 basis points (bps) at best, commencing in the October 2024 monetary policy meeting, with a stance change in the preceding review, after some visibility on the monsoon turnout and greater clarity on the actions of the US Federal Reserve.

While the government’s budgeted fiscal deficit of ₹16.9 trillion for FY25 is unlikely to be overshot with a possible shortfall in non-tax revenues likely to be offset by a cut in capital expenditure, the target of 5.1 per cent of GDP may be exceeded mildly on account of a lower nominal GDP number.

Although India’s current account deficit is expected to widen to $44-46 billion in FY2025 from the $33-35 billion projected in FY2024, it is expected to remain manageable at 1.2 per cent of GDP, ICRA added.

Fibre2Fashion News Desk (DS)