EY report – ThePrint – ANIFeed

New Delhi (India), Nov 2 (ANI): Upbeat GDP growth projections for FY25 hinge on strong government investment and effective inflation control for India to achieve above 7% growth, Ernst report & Young (EY).

In September 2024, consumer price index (CPI) inflation was recorded at 5.5%, pushing average inflation for the second quarter of FY24 to 4.2%, slightly above RBI’s estimated target of 4.1%.

Projections for the third quarter suggest that CPI inflation could rise to 4.8%, which could delay any rate cut by the RBI, especially as inflation continues to run above the desired average target.

During its October monetary policy review, the RBI decided to keep the repo rate at 6.5% in light of the global rate cut trend, including a 50 basis point cut by the US Federal Reserve in September.

Despite this, the RBI remains bullish on India’s real GDP growth for FY25, forecasting a rate of 7.2%, driven by anticipated strong growth in private consumption and investment. However, a significant downside risk looms, particularly due to a 19.5% drop in government investment spending, which is key to sustaining economic momentum.

For the rest of the fiscal year, the robust performance of personal income tax revenues – up 25.5 percent – ​​contrasts sharply with the negative growth of corporate income tax revenues at -6.0 percent. This highlights the challenge of meeting the government’s budgeted growth targets, especially as capital spending also faces a steep decline.

Recent high-frequency economic data points to a moderation in the pace of growth. The manufacturing purchasing managers’ index (PMI) fell to 56.5 in September, while the services PMI fell below 60 for the first time since January 2024, signaling a slowdown in manufacturing and new orders. In addition, the index of industrial production (IIP) contracted for the first time since October 2022, reflecting broader economic challenges.

The International Monetary Fund (IMF) projected a moderation in India’s GDP growth from 8.2% in FY24 to 7% in FY25 and further to 6.5% in FY26, attributing this slowdown to the depletion of pent-up demand from the pandemic.

Sustaining the pace of growth will require accelerated government investment to avoid crowding out private sector initiatives. (YEAR)

This report is automatically generated by the ANI news service. ThePrint assumes no responsibility for its content.