India's GDP growth may slow down to 6.5% in FY25: Axis Bank report

India's gross domestic product (GDP) growth, despite a positive revision for the financial year (FY) 2024, is expected to slow down in FY 2025 due to escalating global challenges, according to a report by Axis Bank. Chief economist Neelkanth Mishra stated that India's real GDP growth is projected to ease to 6.5 per cent in FY 2025.

One of the key highlights of the no-action policy on Friday was the sharp revision of the GDP growth for the current financial year, which is now projected at 7 per cent as compared to 6.5 per cent earlier.

Mishra also commented on the United States, the world's largest economy, stating that its growth is currently being supported by a fiscal deficit. He foresees the much-feared recession as delayed, not deferred.

 

The report said that alleviating tight liquidity conditions, similar to a 25-30 basis points rate hike, may only occur with the subsiding of global risks. The report highlighted the crucial role of fiscal discipline, infrastructure development, and capital expenditure in maintaining sustained growth.

Mishra also said that the Reserve Bank is unlikely to cut its repo rate through the calendar year 2024 due to volatile food inflation.

According to the Reserve Bank of India’s (RBI) ‘State of the Economy’ report, food inflation poses the sole threat to the central bank’s commitment to align headline inflation with the 4 per cent target. The report said that the central bank is preparing for anticipated upticks in the inflation readings for November and December. The firming up of several constituent prices has the potential to disrupt the progress achieved in the last two months.

India's Consumer Price Index (CPI) inflation fell to 4.87 per cent in October, marking the lowest figure since June, compared to the 5.02 per cent reported in September. Despite this overall decline, the food price index exhibited a sequential increase in October, breaking a two-month downward trend. Notably, within the food category, the vegetable price index saw a rise of 3.4 per cent month-on-month, primarily driven by a 15.5 per cent sequential surge in onion prices.