Indian economy may grow at 6.2% next fiscal on manufacturing, services sector growth: Report
Indian economy is likely to grow at 6.2% in the next fiscal, mainly due to the favourable combination of neutral policy settings, positive credit momentum, and manageable macros amid a 15-year high household debt levels, a foreign brokerage report said on Tuesday. Despite the rising external headwinds, India is likely to grow 6.2% next fiscal against a consensus of 6.3% to $3.9 trillion from $3.57 trillion in FY24 on a likely 7% growth, as consumption growth is likely to stabilise at 4.7% from 4.5% in FY24, Tanvee Gupta-Jain, the UBS India chief economist, said in a note.
A pick-up in capex is expected to become more broad-based in FY25, led by marginally moderate public capex but higher private corporate capex after elections, Jain said. Another growth driver will be the residential housing sector along with exports, which may marginally improve, depending on global growth.
"We expect India to maintain medium-term growth of 6.5% annually from FY26 through FY30 when it sees the GDP touching SD 6 trillion," she said, adding the country's potential growth could benefit from digitalisation adoption, increased services exports and a manufacturing push. However, she flagged the record high level of household debt, which according to the latest RBI data surged to 5.8 per cent of GDP in FY23.
Explaining the sweet spot that the country is in, she said a key factor supporting better economic activity is the sharp pick-up in credit growth, which may clip at 13-14% next fiscal as well (which is also partly driven by higher household leverage explaining a fifth of the past two years private consumption growth). "We expect bank credit to sustain double-digit growth of 13-14 per cent in FY25 and a virtuous investment cycle could help
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