India’s economy is projected to grow at around 6.5% in fiscal year 2024/25, leaning toward the lower end of the government’s 6.5%-7% forecast due to global uncertainties, according to the finance ministry’s November economic report.
Mixed Growth Signals
While growth in the October to December quarter looks promising, driven by resilient rural demand and improving urban consumption, the July to September period witnessed a sharper-than-expected slowdown. This dip was attributed to weaker manufacturing and consumption growth.
Despite challenges, India is optimistic about maintaining its status as one of the fastest-growing economies, with a brighter outlook for the second half of the fiscal year compared to the first.
Monetary Policies and Demand Slowdown
The report linked the demand slowdown to the Reserve Bank of India’s (RBI) tight monetary policy stance. The central bank has kept interest rates unchanged for 11 consecutive policy meetings, focusing on inflation control over growth stimulation.
Emerging Risks for 2025/26
Looking ahead, the report flagged risks for the next fiscal year, including:
- Uncertain global trade growth
- A stronger US dollar
- Potential tariffs under US President-elect Donald Trump’s policies, raising fears of a global trade war
Long-Term Growth Optimism
Despite global headwinds, the finance ministry remains confident in India’s domestic economic fundamentals, which are expected to support robust growth in fiscal year 2025/26 and beyond.
