According to rating agency Crisil, India's GDP growth is likely to moderate to 6.8% this fiscal year (FY25), down from 8.2% in FY24, as high interest rates and tougher lending standards begin to dampen urban demand.
"A somewhat lower fiscal impulse to growth should also weigh on growth," stated the ET-Crisil India Progress Report, which was released at the event on Wednesday.
According to the analysis, consumer price index (CPI) inflation is predicted to fall to 4.5% on average in FY25, down from 5.4% the previous year due to to decreased food prices. The agency did, however, identify weather and geopolitical uncertainties as major risks to its growth and inflation estimates.
"Although kharif seeding is larger this year, the impact of excessive and unseasonal rains must be assessed. A bad weather occurrence for the remainder of the fiscal year is a constant risk to food inflation and agricultural income," it stated.
In addition, the report noted that "any further escalation in geopolitical tensions could constrain supply chains, disturb trade and push up oil prices, impacting inflation and sending input costs soaring." It anticipates India's current account deficit to increase to 1% of GDP this fiscal year from 0.7% in FY24, although it will stay in the safe zone due to strong service exports and high remittance inflows.
According to the analysis, the Indian economy might increase by an average of 6.7% between fiscal 2025 and 2031, reaching $7 trillion. This would be comparable to the 6.6% growth recorded in the pre-pandemic decade, which was driven by capital spending and an increase in productivity.
However, labor contribution is likely to remain low throughout the term.
