India’s GDP May Grow At 6.5% In FY25; H2 Is Better Than H1: Finance Ministry Report

Last Updated:December 26, 2024, 18:42 IST

There are good reasons to believe that the outlook for growth in H2 of FY25 is better than what we have seen in H1, according to the finance ministry’s Monthly Economic Review November 2024.

The conclusion of the monsoon season and the expected increase in government capital expenditure are expected to support the cement, iron, steel, mining, and electricity sectors, says the finance ministry.

The Indian economy is expected to grow at around 6.5 per cent in the current financial year 2024-25, amid strong rural and urban demand, industrial activity, and performance of the high-frequency indicators, the finance ministry said in its latest report on Thursday. It also said after a moderation in Q2 of FY25, the outlook for Q3 appears bright.

“On the demand side, rural demand remains resilient, as highlighted by the 23.2 per cent and 9.8 per cent growth in two & three-wheeler sales and domestic tractor sales, respectively, in October-November 2024. Urban demand is picking up, with passenger vehicle sales registering YoY growth of 13.4 per cent in October-November 2024 and domestic air passenger traffic witnessing robust growth. Consequently, we expect the economy to grow at around 6.5 per cent in real terms in FY25,” the ministry’s Monthly Economic Review November 2024.

On inflation, the report said the RBI has projected CPI inflation at 4.8 per cent for FY25, with Q3 at 5.7 per cent and Q4 at 4.5 per cent. The farm sector outlook is optimistic, generating hopes that food price pressures will decline gradually.

“There are good reasons to believe that the outlook for growth in H2 of FY25 is better than what we have seen in H1,” the ministry said.

According to the report, after a moderation in Q2 of FY25, the outlook for Q3 appears bright, as reflected in the performance of HFIs for October and November 2024. An increase in Minimum Support Price (MSP) for rabi crops, high reservoir level and adequate fertiliser availability bodes well for rabi sowing. Industrial activity is likely to gain traction.

“The October and November 2024 PMI remained firmly in the expansionary range, supported by new business growth, strong demand, and advertising efforts,” the ministry stated.

The conclusion of the monsoon season and the expected increase in government capital expenditure are expected to support the cement, iron, steel, mining, and electricity sectors. The services sector continues to perform well, with PMI services being in an expansionary zone in October and November 2024. However, many major economies’ global uncertainties and aggressive policies threaten domestic growth, it added.

The report comes against the backdrop of worries around the deceleration of economic growth. The Indian economy grew 6.7 per cent in the June quarter and 5.4 per cent in the July-September period.

Earlier this month, the Reserve Bank of India also significantly lowered the growth projection for the current fiscal year to 6.6 per cent from 7.2 per cent earlier.

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