The Indian economy is to grow to 6.5%in FY25, despite external challenges, powered by strong agricultural production and resistant service sector, as stated in the monthly economic report (MER) published by the Ministry of Economic Affairs.
The report also states that retail inflation was reduced to 3.6%in February 2025, led by a sharp decrease in food inflation due to seasonal corrections at vegetables and effective government measures, while agricultural production estimates indicate ongoing stability.
The Union's government maintained a balance between fiscal consolidation and growth, with a budget of 2025-26 outlined the clear path of debt reduction. The objectives of fiscal deficit and expenditure remain in accordance with estimates and strengthen confidence in economic proceedings. Government capital expenditure is expected to pick up after the elections and further support economic activities, as stated in the report.
Indian stock markets witnessed repairs after long -term bull running, which led to a profit of foreign investors. However, a strong external influx of debt markets and stable confidence in domestic investors has alleviated this impact. On the external front, the report emphasizes that the export of basic goods (non-oil, non-Bullion) increased by 8.2% during FY25 (April to February), which showed resistance. The gross influx of direct foreign investments increased by 12.4%in the same period, while foreign exchange reserves remain adequate for 11 months of import.
Trends of employment remain stable, while the unemployment rate of urban unemployment has not changed in the fourth quarter of FY25. Various employment outlook surveys indicate optimism and increased willingness to hire in the upcoming quarter. The report notes that inflation pressures increased to seven months in February, especially due to decreasing food inflation, and the expectations of record food production in 2024-25 are likely to keep inflation under control.
However, risks persist, including geopolitical uncertainties, volatile commodity prices and financial market fluctuations.
The report states that economic growth in the 4th quarter is expected to be supported by improved exports, expenditure on government government after the elections and economic activity associated with events such as Kumbh Mel. The proposed changes in the personal income tax structure are expected to improve one-off income and increase consumption, while in February it will reduce the 25-bay policy associated with increased liquidity provisions, will probably support growth dynamics.
