India's Economic Tides: Navigating 2025's Fiscal Challenges

Moody's Analytics warns that India must adapt its fiscal and monetary policies to achieve a 6.4% GDP growth in 2025. Challenges include a weakening rupee, declining foreign investment, and volatile inflation. The 2025-26 Union Budget is crucial to stimulate domestic demand and reduce the fiscal deficit.

In the face of economic hurdles, Moody's Analytics advises India to reform its fiscal and monetary policies to hit a GDP growth target of 6.4% in 2025. The nation's weak rupee, wavering foreign investments, and inflation volatility are key risk factors, the analytics firm stated on Wednesday.

Anticipated adjustments in monetary strategies during the year's first half are vital. Moody projects the 2025-26 Union Budget will bolster domestic demand, focusing on investment and aiming to trim the fiscal deficit to under 4.5% of GDP. In contrast, the 2023-24 fiscal deficit stood at 5.6%, expected to reduce to 4.9% this fiscal year.

Despite past economic vigor, Indian GDP growth slowed through 2024, rebounding slightly in Q4. However, challenges like high interest rates, potential US tariffs, and a depreciating rupee could curb future economic momentum. Inflation is forecasted to moderate slightly, yet ongoing currency deterioration poses risks.

(With inputs from agencies.)