Indian economy to grow at 7.1% in FY25: Moody’s Analytics

The Indian economy is projected to grow faster at 7.1 per cent this fiscal (FY25), Moody’s Analytics stated in a recent report. Further, it is to be noted that, India continues to remain resilient amid global uncertainties. In its new Asia Pacific outlook, the international credit ratings kept the country’s growth forecast unchanged at 6.5 per cent for 2025 while projecting faster growth of 6.6 per cent in 2026.

Moody’s Analytics projected better inflation outcomes, as it reduced India’s inflation forecast to 4.7 per cent from the 5 per cent predicted earlier. The country’s inflation remained below 4 per cent in July and August. The 2025 and 2026 forecast was unchanged at 4.5 per cent and 4.1 per cent, respectively as detailed in a report by IANS. Further, for the Asia Pacific region, Moody’s raised the 2025 forecast to 4 per cent from 3.9 per cent as projected earlier.

Exports have been a key driver for the region, but growth rests on an unstable footing. Key export drivers such as chips are losing steam. Global goods demand has been soft. And China's policy-led ramp-up in exports has sparked protectionism abroad, said Moody’s.

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Growth projections of other prominent institutions

The World Bank earlier in September revised its fiscal year 2025 or FY25 growth forecast for India to 7 per cent, from its previous estimate of 6.6 per cent, mentioning government spending on infrastructure, an escalation in household investments in real estate, better-than-expected monsoon and an increase in the agricultural output, supported by an increase in private consumption to help in fuelling growth.

S&P Global on the other hand in a recent report retained India's growth forecast at 6.8 per cent for the fiscal 2024-25. The global ratings said that In India, GDP growth moderated in the June quarter as high interest rates temper urban demand, in line with our projection of 6.8 for GDP for the full fiscal year 2024-2025. The rating agency also retained India's growth forecast for FY 2025-26 at 6.9 per cent.

According to the report, the Reserve Bank of India (RBI) considers food inflation a hurdle for rate cuts.

"Our outlook remains unchanged: we expect the RBI to begin cutting rates in October at the earliest and have penciled in two rate cuts this fiscal year (year ending March 2025)," said the report.

The year-on-year inflation rate at 3.65 per cent, based on the All India Consumer Price Index (CPI), for August was the second lowest in the last five years. In July, the inflation rate (3.54 per cent) had fallen below the RBI’s medium-term target of 4 per cent for the first time.