- India's GDP growth slowed more than expected in July to September, hampered by weaker expansion in manufacturing and consumption.
India's economy is expected to grow at around 6.5% in fiscal year 2024/25, closer to the lower end of its 6.5%-7% projection, as global uncertainties pose a dampening threat, the government said on Thursday.
The growth outlook for October to December appears bright, with rural demand remaining resilient and urban demand picking up in the first two months of the quarter, according to the finance ministry's monthly economic report for November.
Growth slowed more than expected in July to September, hampered by weaker expansion in manufacturing and consumption. India has maintained that its economy will grow at a world-beating pace of 6.5%-7% despite a challenging environment.
The outlook is expected to be better in October-to-March than in the first six months of the financial year, it said.
"The combination of monetary policy stance and macroprudential measures by the central bank may have contributed to the demand slowdown," the report said.
India's central bank has kept interest rates unchanged for 11 straight policy meetings, despite calls for rate cuts to support growth amid high inflation.
For the next financial year starting April 1, 2026, the report said, newer risks have emerged, such as uncertain global trade growth and a stronger U.S. dollar.
U.S. President-elect Donald Trump has threatened many nations, including India, with higher tariffs on imports, raising risks of a global trade war after he takes office on Jan. 20. Trump's election victory has also fuelled a run-up in the dollar and U.S. yields.
However, India’s growth outlook in 2025/26 and coming years is bright in terms of domestic economic fundamentals, the finance ministry's report said.
Looking into FY26, it said, newer uncertainties have emerged and global trade growth is looking more uncertain than before.
Elevated stock markets continue to pose a big risk, it said, adding, the strength of the US dollar and a rethink on the path of policy rates in the United States have put emerging market currencies under pressure.
In turn, it said, that will make monetary policymakers in emerging economies think more deeply about the path of policy rates.
"Recent exchange rate movements may have lowered their degrees of freedom. In sum, sustaining growth will require a deeper commitment from all economic stakeholders to growth," it said.
With regard to PMI, the report said, the October and November indicators remained firmly in the expansionary range, supported by new business growth, strong demand, and advertising efforts.
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The conclusion of the monsoon season and the expected increase in government capital expenditure are expected to support the cement, iron, steel, mining, and electricity sectors, it said.
However, it said, many major economies' global uncertainties and aggressive policies threaten domestic growth.
On the demand side, it said, rural demand remains resilient, as highlighted by 23.2 per cent and 9.8 per cent growth in two- and three-wheeler sales and domestic tractor sales, respectively, during October-November 2024.
Urban demand is picking up, it said, with passenger vehicle sales registering year-on-year growth of 13.4 per cent in October-November 2024, and domestic air passenger traffic witnessing robust growth.
On the inflation front, the RBI has projected CPI inflation at 4.8 per cent for FY25, with Q3 at 5.7 per cent and Q4 at 4.5 per cent, it said.
The farm sector outlook is optimistic, generating hopes that food price pressures will decline gradually, it said.
Source: Livemint
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