Summary:

India Ratings & Research (Ind-Ra) has raised India's GDP growth forecast for the current fiscal year to 7.5% from 7.1%, citing stronger consumer demand. The agency highlighted sustained growth driven by government capex, deleveraged business and bank balance sheets, and a rising private sector capex cycle, now supported by the union government budget. The budget aims to increase agricultural and rural investment, improve credit delivery to MSMEs, and encourage job growth. Ind-Ra believes these measures will broaden the consumer demand base, surpassing the RBI's 7.2% and the Finance Ministry's 6.5-7% forecasts.

Ind-Ra forecasts Private Final Consumption Expenditure (PFCE) to reach a three-year high of 7.4% in FY25, up from 4% in FY24. Currently, consumption demand is skewed towards higher-income households. However, Ind-Ra expects an above-average monsoon and initiatives in the FY25 budget to boost demand among rural and low-income individuals. Despite the risk of food inflation, Ind-Ra predicts lower average retail inflation in FY25 compared to FY24, which will support real wage growth and help correct the existing demand imbalance.

Source: IBEF

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