According to a Bank of Baroda report released on Saturday, the Indian economy is set to pick up growth momentum in the second half of the current financial year as digital payments, power demand, service PMI, air passenger traffic, toll collections, and GST collections all point to a recovery that is already underway.
The agriculture sector is expected to post a healthy growth of 3.8 per cent in FY25, up from 1.4 per cent in FY24. So far, rabi sowing has been higher compared with last year and thus bodes well for agriculture growth.
GST collections also rose by 8.3 per cent in Q3 FY25 and thus indicates a pickup in consumption demand.
Better agricultural prospects will boost rural demand, and reports even indicate a recovery in urban demand. Inflation is likely to have eased off a bit in December 2024 and would ease in the following months as well. The key risk is, however, the continued depreciation of the rupee.
"Some degree of uncertainty is likely to prevail in the global and domestic financial system until there is more clarity on US policies under the new President. We remain cautiously optimistic on India's growth prospects in 2025," the report said.
Some high-frequency indicators have indicated a pick-up in demand with an uptick noted in digital payments, power demand, electronic imports and fertiliser sales. However, total PV sales were lower owing to post-festive inventory and limited new launches, the report pointed out.
On the rural front, two-wheeler sales also saw a sharp decline due to cash flow issues and a shift towards the EV market.
Notably, the first advance estimates have pegged private consumption growth at 7.3 per cent in FY25 against 4 per cent in FY24, raising the possibility of a steady pickup in the coming months, the report observes.
It also reports that the Centre's fiscal deficit was steady at 5.1 per cent as of November 24 (12 Money Market Account basis).
Till November 2024 Fiscal Year to Date (FYTD) basis, total expenditure increased by 3.3 per cent, with the same growth rate in October 24.
While revenue expenditure growth slowed at 7.8 percent compared with 8.7 percent as of October 24, there was a decrease in capex easing (-12.3 per cent versus -14.7 per cent). On the income side, the Centre's net revenue growth remained stable at 8.7 per cent as of November 24.
Within this, while direct tax collections improved (12.1 per cent versus 11.1 per cent), indirect tax collections growth slowed a tad (9.2 per cent versus 10.5 per cent). Non-tax collections held ground, the report further pointed out.
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