India’s gross domestic product (GDP) is likely to grow at 7.8 per cent in the financial year (FY) 2025 which is marginally higher than the estimated increase of 7.6 per cent in FY24 on a year-on-year (YoY) basis, the Bank of Baroda (BoB) said in a report.
The report added that private consumption is likely to register stronger growth of 6.5 per cent in FY25 compared with 3 per cent in FY24. This is based on the pickup in consumption demand, especially fast-moving consumer goods (FMCG).
In the coming year, inflation is expected to moderate and will provide support to consumption. It is also projected that in addition to the FMCG sector, automobiles will also record higher growth with a record number of sales across segments including passenger cars.
“Lower input cost, absence of supply bottlenecks and moderation in commodity prices will make it attractive for consumers and could push up the demand for entry-level cars,” according to the report.
Notably, it added that the foray of electric vehicles is also expected to add to the strength of this sector. Also, government consumption will register growth at 6.6 per cent for the same period.
Gross fixed capital formation (GFCF) is to grow by 9.3 per cent in FY25. In addition to the continued growth in government capex, a pickup in private capex is expected that will be broader based.
“This will result in more in the second half of the year as higher consumption leads to improvement in capacity utilisation,” according to the report.
According to the recently released estimates, the National Statistical Office (NSO) has pegged the economy to clock a growth of 7.6 per cent in FY24. Given the strong macro-economic fundamentals, consumption and investment are expected to maintain if not drive growth higher in FY25.
With gradual improvement in the global economic outlook, exports are expected to register stronger growth. GVA growth is expected at 7.2 per cent from 6.7 per cent in FY24 led by broad-based improvement across sectors.
“Revival in the agriculture sector on the back of normal monsoon is an assumption here. Based on the above, we expect the Indian economy to clock a growth rate of 7.8 per cent in FY25,” the BoB report added.
It also noted that the global economic outlook is looking up gradually as has been evident from the recent projection by the International Monetary Fund (IMF) which expects global growth at 3.2 per cent in CY25 (3.1 per cent in CY24).
“This goes along with the easing of inflation. Lowering policy rates by global central banks will provide further impetus to the growth story. Against this, exports will register improvement even as there is some uncertainty related to the Middle East,” it added.
