FY25 outlook bright, need to watch out for CAD: Finmin
economic outlook for FY25 remains «bright», the finance ministry said on Friday, noting that the economy will close the current fiscal with strong growth accompanied by stable inflation, robust external account and progressive employment scenario.
«On the whole, India looks positively towards the dawn of FY25,» the ministry said in its monthly economic report for February. It asserted that the pick-up in investment has been «broad-based», driving growth while consumption remains «steady».
The government's capital spending push has helped crowd in private investments, the ministry said. It, however, flagged that an increase in domestic household savings will be necessary to finance private sector capital formation.
The report advised against lowering guard on the current account deficit (CAD), saying it «will bear watching» next fiscal. Also, indications of hardening crude oil prices and global supply chain bottlenecks to trade pose challenges.
In FY24, though, the narrowing merchandise trade deficit and rising net services receipts are expected to result in an improvement in the CAD, it added.
The report argued that improvement in global investor confidence in India has started reflecting in foreign portfolio investment flows.
Bloomberg's announcement to include India in its bond index from January 2025 «should bolster inflows, buoyed by the fiscal prudence that the government has demonstrated over the years», the ministry said. The Centre aims to reduce its fiscal deficit to 5.1% of GDP in FY25 from 5.8%
