Report: The private sector to be helped by GDP moving forward

New Delhi| India needs to accelerate private investment to deal with the risks posed globally due to tariff war and tensions in many countries of the world. This can help the country overcome the challenges arising in the way of economic growth due to external reasons. The private sector is expected to get huge support from the strength of the Indian economy and its continued growth, the Finance Ministry said in a report on Wednesday. Therefore, it is essential that industry recognizes the correlation between its investment spending and consumption demand.

Consumption is expected to increase due to income tax relief and repo rate cut, the Department of Economic Affairs said in the February edition of the monthly economic review. The private sector should take these steps and start investing towards capacity expansion. It said private sector capital formation focused on India’s solid fundamentals and economic prospects will be an important driver of economic growth in the new fiscal year 2025-26.

The economy will grow at 6.5% despite difficulties
Despite global challenges, economic growth has accelerated in the third quarter of 2024-25, the ministry said. GDP is projected to grow at a pace of 6.5 per cent throughout the current financial year. It’s because…Improvement in private consumption and increase in exports. Increasingly, rural demand has been supported in agricultural activities. The performance of the service sector remains strong. The pick-up in government spending following the elections, double-digit increases in e-way bills and economic activities linked to the Mahakumbh Mela are expected to boost growth in the fourth quarter of 2024-25.

Emphasis on long-term development in the budget
The proposed changes in the income tax structure will improve the disposable income of the middle class, which is expected to increase their consumption. More generous monetary measures to boost cash could boost the pace of economic growth with the repo rate cut by 0.25 per cent in February. The Union Budget focuses on measures and reforms to drive long-term growth, which is around the ambition of a developed India. This boosts confidence in domestic economic strength amid significant global uncertainties.

Record grain production will reduce inflation
On the inflation front, the report said that due to fall in the prices of food items, inflation has fallen to a seven-month low in February. Expecting record production of grains in FY 2024-25 will help reduce food inflation in the coming months.

Strength in exports and FDI
On the external front, there has been a significant strengthening of exports of key commodities, which grew at a rate of 8.2 per cent between April-February in the current fiscal year 2024-25. Foreign direct investment (FDI) remains strong. Total FDI has increased by 12.4 per cent during April to January in 2024-25.