Growth momentum to continue in FY25, better year ahead for agri

Government would decide in the FY25 budget whether the fiscal deficit target of 5.1 per cent of GDP can be lowered further to fast track India towards the fiscal glide path

India’s GDP growth of 8.2 per cent in FY24 towers above several major economies, with growth momentum continuing into the first two months of FY25, sources said. 

“Domestic economic activity remains resilient, backed by strong investment demand, upbeat business and consumer sentiments, the robust corporate and bank balance sheets,” the source said.

The government would decide in the FY25 Budget whether the fiscal deficit target of 5.1 per cent of the GDP can be lowered further to fast track India towards the fiscal glide path, sources said. 

They said that with the expectation of a good monsoon, the agriculture sector growth is expected to be better in the current financial year. The manufacturing sector is also expected to continue its growth momentum. Before 2020, they had balance sheet issues and the growth was stagnant. In the second decade, they are catching up.  

The growth in the gross value added (GVA) in the agriculture sector was 1.4 per cent in FY24, against 4.7 per cent in FY23. The manufacturing GVA grew by 9.9 per cent in FY24 due to the low base effect with a negative growth of 2.2 per cent in FY23.  

GDP data, sources said, shows that the private non-financial gross fixed capital formation has picked up pace in the past two years, with a growth of 4.6 per cent compounded annual growth rate in the January-March 2024 period.  

“For the rest of the decade, barring the geopolitical disturbances, private capital expenditure will be an important driver of growth and employment,” the source said. 

Sources indicated that a full economic survey would be published before the Budget. 

The government, sources said, is tracking shipping rates due to the ongoing Red Sea crisis as shipping disruptions could have implications in capital formation. 

Some of the downside risks to the economy include the rising retail exposure to stocks through direct stock investments. The derivatives positions keep household savings rate from recovering, but it is not a systemic risk, sources said.

“Young investors have not seen the down market and so we will see how they react when they face losses,” the source said. 

The divergence of monetary easing paths of major central banks could also add to the policy uncertainty.