GDP Forecast: Slow Growth and Monetary Policy Challenges Ahead

Economic growth for the ongoing fiscal year is expected to fall short of official estimates at 6.2%, with anticipation of a modest rise to 6.5% in FY26, a foreign brokerage reports. Despite recent improvements in various indicators, challenges like subdued private investment persist, affecting overall growth prospects.

Economic growth in the current fiscal year is projected to underperform against official estimates, achieving a rate of 6.2% according to a report by a foreign brokerage. The forecast anticipates an increase to 6.5% by the fiscal year 2026, yet recent figures, such as a 5.4% GDP growth in Q2FY25, have been disappointing.

While the December quarter is seeing growth in certain sectors like agriculture, exports, and construction, other indicators like utilities and private investment remain weak, with only 65% showing positive growth compared to 75% in the June quarter. Urban consumption, however, is showing signs of improvement.

The Ministry of Statistics predicts a 6.4% GDP growth for FY25, slightly lower than the Reserve Bank of India's revised estimate of 6.6%. Inflation, forecasted to decline, along with potential rate cuts by the RBI, will play significant roles in stimulating economic growth. A disciplined fiscal approach will be necessary to meet fiscal deficit targets amid softening tax revenues.

(With inputs from agencies.)