Indian economy is expected to grow at a healthy 6.8 per cent in the financial year 2025-26, based on strong high-frequency indicators, says a Bank of Baroda (NS:BOB) report.
Nominal GDP growth is likely to be around 10.5 per cent in the next financial year, it adds. Key drivers of this growth are strong air passenger traffic, increase in services PMI, and higher GST collections.
Besides, a more significant rabi crop sowing is likely to support agricultural growth, thus strengthening the economy's foundations.
The report pointed out that the Indian economy has shown resilience, driven by strong festive demand and steady improvement in economic activity. This resilience is reflected in high-frequency indicators that have shown a significant uptick in the third quarter of FY25.
The report states that though there is a slowdown in 2024-25, the bright side of it is that both private and government consumption are expected to register a strong growth of 7.3 per cent (4 per cent in FY24) and 4.1 per cent (2.5 per cent in FY24) respectively in FY25. Furthermore, the growth in exports is likely to record a healthy growth of 5.9 per cent during FY24, thus coming in with a surprise in the positive direction against the expected growth of 2.6 per cent.
The report also says that government expenditure will pick momentum in the second half of 2024-25, which will emerge as a growth driver. It is also quite bullish about higher growth in the agricultural sector.
However, the report cautions downside risks from global headwinds. Among them, the threat of a tariff war looms large because the incoming US administration under President Trump may impose protectionist trade policies. Such measures could disrupt global trade and may even trigger retaliatory actions that could risk the stability of the global economy.
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