Rating agency Crisil has projected India’s GDP growth to decline from 8.2 percent last year to 6.8 percent in the current fiscal year 2024-2025, pressured by rising interest rates and limited fiscal stimulus.
The report mentioned that risks are tilted toward the downside given the lacklustre second-quarter growth numbers.
However, many high-frequency indicators from October, such as automobile sales and export growth, still show a positive outlook for the third quarter, suggesting that the slowdown in the second quarter may be temporary.
Official data from the Ministry of Statistics and Programme Implementation, released on Friday, revealed that the economy grew by 5.4 percent during the July-September quarter compared to 8.1 percent during the corresponding quarter last fiscal year.
Meanwhile, in the April-June quarter, the economy grew by 6.7 percent, falling short of the RBI’s forecast of 7.1 percent.
Meanwhile, on a positive note, agricultural growth in the country is rising, with significant potential for further expansion. This growth is driven by expectations of strong kharif cultivation, owing to a healthy monsoon season that ended 8 percent above the Long Period Average.
“All this should provide a fillip to agricultural incomes and rural consumption,” Crisil stated.
Additionally, the abundant supply of kharif crops in the market is expected to help reduce food prices, which have been high in recent months, affecting the purchasing power of both rural and urban households. October’s food inflation was primarily driven by rising vegetable, oil, and fruit prices.
“Easing inflation, along with the onset of the festive and wedding season, is likely to buoy consumption growth in the second half of this fiscal year,” the report added.
India’s retail inflation in October stood at 6.21 percent, breaching the RBI’s upper limit of 6 percent.
Food prices remain a major concern for policymakers in India, who aim to bring retail inflation down to a sustainable 4 percent. To keep inflation under control, the RBI has maintained the repo rate at 6.5 percent.