India's GDP growth for the fiscal year 2024-25 could potentially exceed 7 percent, nearing 7.5 percent, according to the National Council of Applied Economic Research (NCAER). This projection is based on high-frequency indicators reflecting robust economic dynamism.
The June monthly economic review highlights that the optimistic outlook is driven by strong economic activity in the first quarter, focused policy measures on investment and growth, macroeconomic stability, and the anticipation of a normal monsoon season.
NCAER Director General Poonam Gupta stated, “This outlook is underpinned by the buoyancy in economic activity witnessed in the first quarter; a keen policy focus on investment, growth, and macroeconomic stability; and the expectations of normal monsoon.”
The Reserve Bank of India (RBI) has revised its real GDP growth forecast for FY25 upward to 7.2 percent from the previous 7 percent. This upgrade is echoed by the World Bank, the IMF, and global rating agencies.
With inflation seemingly having reached its peak, further monetary tightening appears unlikely, and easing might occur within the year. Gupta added, “The global environment seems benign as well in the absence of any known global risks so far.”
However, Gupta noted that managing food prices remains a challenge. She suggested a comprehensive policy approach, including the development of climate-resilient food supply chains and a gradual shift towards packaged and preserved foods to address periodic supply and demand imbalances.
High-frequency indicators such as the Index of Industrial Production (IIP) for core industries showed accelerated growth in April 2024. Bank credit growth remained robust at over 20 percent, despite a slight slowdown in personal credit growth. The expectation of an ‘above normal’ monsoon, despite deficient rainfall in June, is promising for the agricultural sector.
The Purchasing Managers’ Index (PMI) for both manufacturing and services sectors maintained expansionary momentum, although it slightly decelerated in May, according to the NCAER report.
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