India Ratings & Research (Ind-Ra) has increased its forecast for India's GDP growth in the current fiscal year to 7.5%, up from the previous estimate of 7.1%. This revision comes on the back of expected improvements in consumption demand. The agency attributes this optimistic outlook to ongoing government capital expenditures, healthier balance sheets of corporations and banks, and a nascent private corporate investment cycle, all supported by recent union government budget measures.
The budget promises increased spending on agriculture and rural areas, better credit access for MSMEs, and incentives for job creation, which Ind-Ra believes will enhance consumer demand across the economy.
Ind-Ra's revised growth forecast surpasses other predictions, including the Reserve Bank of India's estimate of 7.2% and the Finance Ministry's Economic Survey, which forecasts growth between 6.5% and 7%.
The agency also anticipates that Private Final Consumption Expenditure (PFCE) will reach a three-year high of 7.4% in FY25, up from 4% in FY24. This is expected to help address the current skewed consumption patterns, where demand is largely driven by higher-income households.
Ind-Ra expects that a favorable monsoon and new budget measures will help increase demand for goods and services among rural and lower-income households, balancing the consumption trends.
Despite concerns over food inflation, Ind-Ra forecasts that retail inflation in FY25 will be lower than in FY24, which should support real wage growth.
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