CareEdge Ratings has forecasted India’s GDP growth to moderate but remain healthy at 6.5% in the current financial year (2024-25) and rise to 6.7% in 2025-26. Despite global economic uncertainties, the agency expects India to maintain steady economic momentum in the coming years.
At a recent webinar on the Economic and Sector Outlook for 2025, Sachin Gupta, Chief Rating Officer and Executive Director of CareEdge Ratings, highlighted cautious optimism within India’s corporate sector. He noted that businesses remain hesitant to commit to long-term investments amid an uncertain global environment, though private investment is expected to improve in 2025, bolstered by potential monetary policy easing.
The Reserve Bank of India (RBI) recently revised India’s growth forecast for FY25 to 6.6%, down from 7.2%. CareEdge, however, anticipates a rebound in the latter half of FY25, driven by a recovery in consumption and an uptick in government capital expenditure. Rajani Sinha, Chief Economist at CareEdge Ratings, identified healthy agricultural production and a robust services sector as key drivers of growth in the second half of the financial year.
Inflation is also expected to moderate, with Consumer Price Index (CPI) inflation projected at 4.8% for 2024-25 and 4.5% for 2025-26. Food inflation is likely to ease due to a strong kharif harvest and favorable rabi sowing conditions. Wholesale Price Index (WPI) inflation is estimated to average 2.5% in 2024-25 and 3% in 2025-26.
On the fiscal front, CareEdge Ratings projects a fiscal deficit of 4.8% of GDP for 2024-25, slightly below the budgeted 4.9%. While corporate tax collections remain weak, robust income tax collections are expected to offset the shortfall. However, government capital expenditure may fall short by Rs 1.5 trillion.
The agency also predicts manageable current account deficits (CAD) and high forex reserves to support the rupee, though external factors like a strong dollar and weak yuan could exert pressure. The rupee is expected to trade around Rs 84 by the end of FY25 and between Rs 84-86 by the end of FY26.
In monetary policy, the RBI is anticipated to cut policy interest rates by 50-75 basis points in 2025 as food inflation eases.