India likely to keep economic growth momentum in FY25 despite risks

India expects its economy to grow around 7% in the next fiscal year despite new geopolitical risks emerging from the Red Sea crisis that could affect global inflation and economic output.
S&P Global Ratings expects India will remain the fastest-growing major economy for the next three years.
S&P Global Ratings expects India will remain the fastest-growing major economy for the next three years.

In the government's latest economic review on Monday, Chief Economic Adviser V. Anantha Nageswaran's team said India's growth will outpace the global economy in the next fiscal year that starts from April 1, supported by stable domestic demand and private investment.

"Recent events in the Red Sea may have brought back concerns over reliance on global supply chains, further aggravating the slower growth in global trade in 2023," the government said.

If supply chain disruptions in 2024 persist, it could impact trade flows, transportation costs, economic output and inflation worldwide, it said, adding that India is "quietly confident of weathering the emerging disturbances."

The growth estimates come days before Prime Minister Narendra Modi's government presents its last budget before the country heads to a general election this summer.

Finance Minister Nirmala Sitharaman will present the budget on Feb. 1, factoring in the growth projections.

The latest projection compares with the first advance estimates, where the economy was projected to expand 7.3% in the current fiscal year, after growth of 7.2% in 2022/23 and 8.7% in 2021/22.

"The robustness seen in domestic demand, namely, private consumption and investment, traces its origin to the reforms and measures implemented by the government over the last 10 years," the review said.

S&P Global Ratings expects India will remain the fastest-growing major economy for the next three years, putting it on track to become the world's third-largest economy by 2030, overtaking Japan and Germany.

Strength in the financial sector and recent and future structural reforms will make it "eminently possible" for the Indian economy to grow above 7% in the coming years, the review said.

India expects headline retail inflation to gradually slow, the review added but did not specify a time frame. Annual retail inflationINCPIY=ECI rose to 5.69% in December from 5.55% the previous month.

Reuters