CRISIL report: Improvement in domestic demand and decline in inflation to increase consumption, GDP to gain momentum

New Delhi| Due to the efforts of the government and many positive developments, there are signs of improvement in the country’s domestic demand. In the fourth quarter of the last financial year 2024-25, there is a possibility of further increase in consumption demand due to better production of Rabi crops and softening of inflation. CRISIL said in a recent report, overall, these factors will help in boosting the pace of the domestic economy amid global uncertainty arising due to the tariff war.

The report further notes that high frequency indicators such as improved growth in the production of capital products, infrastructure goods and construction goods in the second half of 2024-25 strengthen growth prospects. As far as improvement in demand is concerned, the better performance of the Index of Industrial Production (IIP) in the manufacturing sector has been a major contributor to this. Strong growth in manufacturing IIP in the second half has helped increase production in sectors such as petroleum products, machinery and textiles.

According to the report, increase in construction activities and capital expenditure by companies also confirms improvement in domestic demand. All these indicators, including healthy production of Rabi crops and decline in inflation, show that the economy is gradually gaining momentum.

External risks such as tariffs are a major concern for exports
According to the report, the imposition of retaliatory tariffs by the US is a matter of concern for India’s growth outlook. External risks such as slow global growth and US tariffs on Indian products after 90 days could impact exports and investment. Overall, while the domestic side of the economy is improving, external risks remain a challenge.