The Indian economy is projected to grow at a robust 6.8 percent in the financial year 2025-26, driven by strong high-frequency indicators, according to a Bank of Baroda forecast.
The report expects nominal GDP growth to be around 10.5 percent during the next financial year. It highlights that key indicators of this growth include robust air passenger traffic, a rise in services PMI, and increased GST collections. Additionally, higher rabi crop sowing is expected to boost agricultural growth, providing a stable foundation for the economy.
The report highlighted that the Indian economy has shown resilience, driven by strong festive demand and steady improvement in economic activity. This resilience is reflected in high-frequency indicators that have shown a significant uptick in the third quarter of FY25.
The report states that while there has been a slowdown in 2024-25, both private and government consumption are expected to register strong growth of 7.3 percent (up from 4 percent in FY24) and 4.1 percent (up from 2.5 percent in FY24) respectively in FY25. Furthermore, in a positive surprise, export growth is likely to register a strong growth of 5.9 percent against 2.6 percent in FY24.
It also highlights that government expenditure is expected to gain momentum in the second half of 2024-25, which will emerge as a driver of growth. Additionally, the report is optimistic about higher growth in the agricultural sector.
However, the report cautions about downside risks due to global headwinds. Among these, the threat of a tariff war looms large, as protectionist trade policies by global economies could disrupt global trade and potentially trigger retaliatory actions, posing risks to global economic stability.
It said, “A range of economic and strategic risks prevail, including the imposition of tariff policies by global powers. This could have a far-reaching impact on global trade.”
Domestically, the focus will shift to key economic events, including the Union Budget, corporate performance in the third and fourth quarters, and the Reserve Bank of India’s monetary policy decisions, the report added.
(Inputs from IANS)
