Indian economy continues growth dynamism, FY25 GDP may come close to 7.5 pct: NCAER

High-frequency indicators reveal that the domestic economy continues to remain resilient. The Purchasing Managers’ Index (PMI) for both manufacturing and services kept the expansionary momentum despite slowing down a bit in May.

Growth in the Index of Industrial Production (IIP) for Core industries accelerated in April 2024; Goods and Services Tax (GST) collections remained buoyant year-over-year.

Bank credit growth remained above 20 percent despite some deceleration in personal credit growth; and expectations of ‘above normal’ monsoon despite deficient rainfall in June held out strongly for the farm sector.

The RBI raised its projections for India's real Gross Domestic Product (GDP) growth for FY 2024-25 to 7.2 percent from 7 percent. Growth projections have been upgraded by various other agencies as well with the median projection at 6.9 percent.

NCAER Director General Dr Poonam Gupta said, “GDP growth during 2024-25 may turn out to be higher than 7 percent and even closer to 7.5%.”

"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.

"Besides, with inflation seemingly having peaked, monetary policy is unlikely to be tightened any further. If anything, it may be eased during the year. Finally, global environment seems benign as well in the absence of any known global risks so far, she said.

Meanwhile, retail inflation eased to a 12-month low of 4.7% in May, though food inflation remained elevated. Dr Gupta said that taming food prices remains a challenge.

“A broader policy framework may be needed to address it, including building climate-resilient food supply as also a gentle shift toward packaged and preserved food supply to bridge the periodical supply and demand gap that has become routine,” she added.