New Delhi: HDFC Securities, a financial advisory firm, projects that India's GDP will grow by 6.4 percent in the fiscal year 2024-25. This forecast comes with caution due to potential risks stemming from a decline in urban demand and insufficient recovery in private capital expenditure.
Conversely, increasing rural demand and expected growth in government spending are identified as significant drivers of economic expansion.
The Reserve Bank of India recently revised its growth forecast for the country, lowering it from 7.2 percent to 6.6 percent. This adjustment followed a reported real GDP growth of 5.4 percent for the July-September quarter of the current fiscal year, which fell short of the RBI's earlier estimate of 7 percent.
Looking ahead to 2025-26, HDFC Securities anticipates a slight improvement in GDP growth to 6.7 percent, as detailed in its report titled 'The Big Review 2024'.
The report highlights that investment will remain a key factor in driving growth, with rural consumption showing stronger resilience compared to urban areas. Urban consumption is currently facing challenges due to ongoing inflation, which is eroding the purchasing power of lower-income urban residents. While high-value discretionary spending appears to be more stable, essential goods are experiencing a decline.
Additionally, restrictions on unsecured retail lending are affecting consumption patterns in sectors such as mobile phones and e-commerce.
On the other hand, rural consumption is gradually recovering, supported by favorable monsoon conditions, sufficient kharif crop yields, and healthy reservoir levels. A decrease in demand for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) suggests positive trends in the labor market.
Dhiraj Relli, MD and CEO of HDFC Securities, remarked on the report, indicating that "India is expected to stand out in GDP growth when compared to other countries. We foresee that the growth for FY 26 will be driven by volume, with the BFSI, industrial, cement, energy, and IT sectors acting as key contributors."
Regarding capital expenditure, the report noted that central government spending has been subdued in the first half of 2024-25, but is anticipated to accelerate in the latter half.
The Economic Survey presented in Parliament earlier this year projected India's real GDP growth conservatively at 6.5-7 percent for 2024-25, while acknowledging that market expectations are more optimistic. Real GDP growth reflects the economic growth rate adjusted for inflation.
India's GDP recorded a remarkable growth of 8.2 percent in the financial year 2023-24, maintaining its status as the fastest-growing major economy. The economy expanded by 7.2 percent in 2022-23 and 8.7 percent in 2021-22.
