India’s economy is projected to grow at 6.5% in FY2024-25, according to the Finance Ministry's Monthly Economic Review released on Thursday. This optimistic outlook comes as agricultural and industrial activities are expected to gain momentum in the second half of the fiscal year, following a slowdown in the first half.
India's Gross Domestic Product (GDP) growth rate fell to 5.4% in Q2 of FY2024-25, marking the lowest growth in seven quarters. This slower growth, which has persisted for three consecutive quarters, led to a 6% growth rate for the first half of the fiscal year.
Despite this, the Finance Ministry remains optimistic about the prospects for the third quarter. "The outlook for Q3 appears bright," the report states, citing improved agricultural conditions due to higher minimum support prices (MSP), favorable reservoir levels, and sufficient fertilizer availability for rabi crop sowing. Additionally, industrial activity is expected to pick up in the coming months.
The end of the monsoon season, along with anticipated increases in government capital expenditure, is expected to boost key sectors like cement, iron, steel, mining, and electricity. The services sector also continues to perform strongly, providing further optimism for the economy's growth in the latter half of the year.
The report acknowledged that the Reserve Bank of India’s (RBI) monetary policy stance and macroprudential measures may have contributed to the slowdown during the first half. However, it noted the recent reduction of the cash reserve ratio (CRR) from 4.5% to 4% by the RBI, which could provide a boost to economic activity moving forward.
Overall, while India faced a dip in growth during the first half of the fiscal year, the Finance Ministry’s review highlighted key factors driving optimism, including a recovery in agriculture, industrial activities, and government investments, which are expected to support the economy’s rebound in the second half.
