December 1, 2024: India’s GDP growth is expected to slow to 6.8% in the 2024-25 fiscal year, according to CRISIL. This marks a significant deceleration from last year’s growth rate of 8.2%, as the country grapples with a challenging economic environment.
The downward revision in GDP growth comes after India’s disappointing performance in the July-September quarter (Q2 FY24). The country’s economy showed signs of stress, with key sectors such as manufacturing, exports, and agricultural output underperforming.
Weak Q2 Performance: India’s economy grew at a slower pace than expected in the July-September quarter, leading to a downward revision in growth projections for the rest of the year.
Global Economic Slowdown: Weak global demand, especially from major economies like the US and China, continues to hurt India’s export growth. Sluggish global trade and geopolitical tensions have also created headwinds for the Indian economy.
Inflationary Pressures: Although inflation has moderated somewhat, it remains a concern. Persistent price pressures, particularly in food and energy sectors, are affecting consumption patterns and putting a strain on household budgets.
Monetary Policy Tightening: The Reserve Bank of India (RBI) has maintained a relatively tight monetary policy to curb inflation, leading to higher borrowing costs. This is expected to dampen private investment and consumer spending, which are key drivers of economic growth.
Challenges in Key Sectors: Sectors like manufacturing and agriculture, which contribute significantly to India’s GDP, have been facing difficulties due to supply chain disruptions, reduced demand, and unpredictable weather conditions, affecting agricultural output.
While CRISIL has lowered its growth forecast, India is still expected to outperform many other major economies. Domestic consumption, infrastructure investments, and government reforms are expected to provide some support to economic growth, though challenges remain.
India’s economy is likely to remain one of the fastest-growing in the world, but growth will likely be more moderate compared to the exceptional 8.2% growth in 2023-24. The country’s ability to navigate the global economic headwinds, continue reforms, and stimulate domestic demand will be key factors in determining whether growth can surpass the revised 6.8% target.
CRISIL’s revised growth forecast reflects the challenges India faces in the current global and domestic environment. While 6.8% growth is still robust by international standards, it represents a marked slowdown from the previous year’s strong performance, highlighting the need for sustained policy efforts to support growth amid evolving global conditions.
