Real GDP growth forecast in India at 6.5 per cent in current and next fiscal year: Report

New Delhi| India is projected to have 6.5 per cent real GDP growth in FY 2025 and 2026, which is favorable to expectations between a resilient economy and infrastructure. The latest ‘EY Economy Watch December 2024’ has estimated that the real GDP growth of the first two quarters of FY2025 is 6.7 per cent and 5.4 per cent respectively, after simultaneously viewing 6.8 per cent and 7.2 per cent respectively for Q3 and Q4 FY2025 with RBI revised growth projections. Annual FY2025 real GDP growth can be estimated at 6.6 percent”.

“However, third-quarter growth could be 6.5 percent or lower if changes in the Indian government’s investment spending remain slow”, the report said. Real GDP growth declined to 5.4 percent in the July-September quarter (second quarter of FY2025), compared to 6.7 percent in the previous quarter.

High frequency data available for October and November points to a mixed picture about the growth pace of the Indian economy. Manufacturing PMI showed a soft rise of 56.5 in November, compared to 57.5 in October. However, service PMI remained almost stable at 58.4 in November 2024, close to the level of 58.5 in October 2024, due to strong international demand and improved business confidence.

Retail sales of motor vehicles continued to grow by 11.2 percent in November, according to data released by the Federation of Automobile Dealers Associations. In particular, retail sales of two-wheelers and tractors witnessed growth. According to the EY report, two-wheelers and tractors showed strong growth rates of 15.8 percent and 29.9 percent respectively in November 2024.

“The IIP growth in October 2024 saw a 3.5 percent increase from 3.1 percent in September, driven by strong manufacturing and electricity production”, the report explained. CPI inflation declined from 6.2 percent in October to 5.5 percent in November, as vegetable prices decreased, while core CPI inflation remained stable at 3.7 percent for the second consecutive month.

Wholesale price index inflation also declined from 2.4 percent in October to 1.9 percent in November. According to DK Srivastava, Chief Policy Advisor, EY India, India’s real GDP growth prospects in the medium term could be kept at 6.5 per cent per annum provided the government increases its capital expenditure in the remaining part of the current financial year and comes up with medium term investments in which there should be participation of the Government of India and State Governments and their respective public sector institutions and private corporate sector.