India's GDP growth to slow down to 6.5% in FY25, projects Ind-Ra

India Ratings and Research (Ind-Ra) projects a GDP growth of 6.5% for FY25, a modest decrease from the previous fiscal year's 7.3%. Despite this dip, the analysis suggests a robust economic recovery propelled by consistent government capital expenditure, strong corporate performance, and a balanced banking sector. The prospect of a forthcoming private corporate capex cycle adds a positive dimension to the outlook.

The report flags concerns about consumption demand, particularly in goods and services favored by households in the upper income bracket. While government capex drives aggregate demand, Ind-Ra emphasizes the necessity for a more diversified consumption demand growth, urging a focus on households with lower incomes. Although the private sector's greenfield capex remains sluggish, the report identifies signs hinting at the potential for a new cycle.

The outlook for global exports in FY25 is challenging due to the growth slowdown in advanced economies and increased trade distortions/geopolitical fragmentation. India's goods and services exports experienced a negative growth rate of 0.14% during the first 10 months of FY24. Additionally, the rise in Wholesale Price Index (WPI) inflation, similar to the producers' price index, poses concerns for gross value added (GVA) and corporate profitability in FY25. WPI, which was in deflation from April to October 2023, has shifted to inflation since November 2023.