India's FY25 GDP growth faces global headwinds: Axis Bank
'India Economics Outlook 2024: India Resilient in a growth-challenged World,' the report has said that the Indian economy, while resilient, is not immune to the deceleration expected in the next fiscal year. This projection comes against the backdrop of the Reserve Bank of India's recent revision of the growth forecast for FY24 to 7%, an increase from the previous 6.5%, buoyed by factors such as rising rural consumption and increasing capital expenditure.
The Indian economy notably outperformed expectations with a 7.6% growth in the September quarter, maintaining its position as the fastest-growing major economy. However, the Axis Bank report cautioned about challenges ahead, noting that tight liquidity conditions, equivalent to a 25-30 basis points rate hike, might ease only when global risks subside.
The report underscored the importance of fiscal discipline, infrastructure development, and capital expenditure in sustaining growth. After rising to a 15-month high of 7.4% in July, led by an increase in food prices spurred by seasonal fluctuations, India's retail inflation fell to a four-month low of 4.87% in October.
"The moderation in services inflation, reflecting slack in the labour force, is evidence of this trend (reduction in core inflation). Fiscal discipline, building infrastructure, and a pick-up in capex also contribute over time…Core (inflation) is currently annualizing well below the 4% target, though global factors (like gold) and strength in housing rents can push it up," the Axis Bank report said.
Read more on livemint.com
