India's economic growth forecast to slow to 6.5pc in FY25, says India ratings and research
A man reads a newspaper as he waits for public transport at a bus stop in Mumbai
India's economic growth trajectory is anticipated to decelerate to 6.5 per cent in the fiscal year 2024-25, according to projections by India Ratings & Research (Ind-Ra).
The rating agency cited a slowdown in industrial sector growth and subdued consumption demand as primary factors contributing to this anticipated slowdown.
Notably, the forecasted growth rate marks a decline from the projected expansion of 7.3 per cent in the current financial year.
A Deccan Herald report cited Devendra Pant, the Chief Economist of India Ratings & Research, who highlighted the underlying trends shaping India's economic landscape.
He noted the importance of sustained government capital expenditure, healthy corporate performance, and favourable global commodity prices in driving economic recovery.
Despite these positive indicators, Pant acknowledged weaknesses in consumption demand and investment patterns, indicating the need for broader-based growth.
India Ratings & Research underscored the uneven distribution of consumption demand across income brackets, with the upper 50 per cent of households driving the bulk of aggregate demand.
The rating agency said that heightened demand among lower-income household would be necessary to sustain consumption growth.
Addressing media representatives, India Ratings & Research highlighted the significance of balanced consumption patterns for fostering inclusive economic growth.
Sunil Kumar Sinha, Principal Economist at India Ratings & Research, cautioned about the potential impact of rising wholesale price inflation on corporate profitability.
According to the Deccan Herald report, he noted that increased input costs could erode corporate margins if not adequately passed on through higher output prices.
Sinha highlighted the challenge faced by producers in passing on elevated input costs amid constrained consumption patterns, further exacerbating pressures on corporate profitability.
The rating agency's projections also encompassed forecasts for key macroeconomic indicators.
India's merchandise exports, which witnessed passive performance in the current fiscal year, are anticipated to encounter global headwinds in 2024-25.
Additionally, the Indian rupee is forecasted to depreciate by over 3 per cent against the US dollar in the upcoming financial year.
On the inflation front, while retail inflation is expected to ease, wholesale price inflation is projected to rise, posing challenges for businesses.