The Indian economy is set for resilient growth in 2025 on the back of strong urban consumption, steady service sector growth, and ongoing investment in infrastructure, S&P Global Ratings has said in its ‘India Outlook for 2025’ note.
For the current financial year, the global ratings agency has retained its growth projection at 6.8%, and for FY26, it has projected growth to rise to 6.9%. S&P Global’s FY25 growth forecast is 20 basis points (bps) higher than the Reserve Bank of India’s (RBI) projection of 6.6%.
The GDP growth print for Q2FY25 was weaker than expected at 5.4%, said S&P Global. “The fiscal impulse was slower, and pockets of weakness such as the urban middle class held back,” it said.
Additionally, the agency expects the RBI to ease monetary policy “modestly” during 2025 as inflationary pressures recede. S&P Global has projected the policy repo rate to be reduced by 50 bps in FY25. It has projected retail inflation to average 4.5%, 30 bps lower than the RBI’s forecast.
“There are various challenges for (India’s) economy including post-pandemic weakness in the public sector and household balance sheets, a highly competitive global manufacturing environment, and weak agriculture sector growth,” noted Vishrut Rana, Economist, S&P Global Ratings.
Creating enough jobs for India’s higher labour force participation, further infrastructure and technology improvement, and stronger public and household balance sheets can support economic growth in India, Rana added. “Better urban infrastructure and improved quality of jobs can crowd-in labour force participation.”
After the weak Q2 growth data, several agencies cut down its growth forecast for the current fiscal year. Goldman Sachs has reduced its FY25 growth forecast by 50 bps to 6%, and UBS has cut the projection by 40 bps to 6.3%.
Department of Economic Affairs (DEA) Secretary Ajay Seth recently said that the Central government is taking the necessary steps to achieve a 6.5-7% growth in the full year, adding that an acceleration in economic growth in expected in H2.
