CRISIL forecasts India's GDP growth at 6.8% in fiscal 2025

While retaining its position as the fastest-growing large economy, India's real gross domestic product (GDP) growth will moderate to 6.8 per cent in fiscal 2025 from 8.2 per cent in fiscal 2024, CRISIL observed in its recent report, citing high interest rates and lower fiscal impulse.

The credit rating agency further elaborated on its forecast for the next fiscal year, saying higher borrowing costs and a possible cut in government spending will slow down the pace of the economy.

However, it noted that the forecast of an above-normal monsoon brings hope for the rural economy, which was a laggard in the previous fiscal.

According to the recently unveiled data by the Ministry of Statistics and Programme Implementation, India's GDP surpassed all expectations and stood at 7.8 per cent in the January-March quarter.

The full-year 2023-24 GDP has been revised upwards to 8.2 per cent from the second advance estimate of 7.6 per cent.

The provisional data reveals that real GDP increased to Rs 173.82 lakh crore in 2023-24, compared to Rs 160.71 lakh crore in the previous fiscal year.

It expects the Consumer Price Index (CPI) to soften to 4.5 per cent in the current fiscal from an estimated 5.4 per cent in the previous fiscal, on the back of lower food inflation, a favourable monsoon and a high base in fiscal 2023-24.

CPI inflation eased marginally to 4.8 per cent in April from 4.9 per cent the previous month.

The annual retail inflation in May was at a 12-month low of 4.75 per cent, marginally down from the previous month.

The retail inflation or Consumer Price Index, in December last year was 5.7 per cent, and since been moderating.

Retail inflation in the country is at the RBI's 2-6 per cent comfort level but is above the ideal 4 per cent scenario.

CRISIL forecasts two policy rate cuts by the RBI this fiscal, starting in October at the earliest.

It said that due to the strong economic growth momentum, RBI's Monetary Policy Committee (MPC) has the space to keep the rates high to control the stated inflation goal of 4 per cent.

On June 7, the MPC decided to keep the policy repo rate unchanged at 6.5 per cent while maintaining its stance of withdrawal of accommodation.

Going forward, the agency expected the current account deficit (CAD) to average 1.0 per cent of GDP in fiscal 2025, the same as our estimate for fiscal 2024.

"Moderation in domestic growth and resilience in exports, given the forecast of an uptick in global trade volume this year over last, will keep the trade deficit and, hence, the CAD in check," Crisil said.

It expects gross market borrowing to be at Rs. 14.1 lakh crore for the current fiscal year, 8.4 per cent lower than last year.

As per the Ministry of Finance, the gross market borrowing for the financial year 2024-25 is projected to be Rs 14.13 lakh crore.