India’s gross domestic product (GDP) growth is projected to improve to 6.7% in the next fiscal year (FY25), according to a Crisil Intelligence report. The report noted that a sustained decline in food inflation, combined with stable non-food inflation, could create room for a rate cut by the Reserve Bank of India (RBI) in the coming months.

Headline inflation is steadily progressing toward the RBI’s 4% target, as food inflation eased for the second consecutive month and non-food inflation remained stable.

The Consumer Price Index (CPI) inflation cooled to 5.2% in December, down from 5.5% in November. Food inflation eased to 8.4% from 9%, while non-food inflation remained stable at 3.1%.

“For the current fiscal, CPI inflation is projected to average 4.6%, with a slight upward bias in the forecast,” the Crisil report stated.

The Index of Industrial Production (IIP) rose to 5.2% in November, up from 3.7% in October (revised from an earlier estimate of 3.5%). This growth was primarily driven by strong performance in investment goods and consumer durables, aided by a low base effect.

The National Statistical Office’s (NSO) first advance estimates indicate a moderation in GDP growth to 6.4% for the current fiscal, down from 8.2% last year.

“Looking ahead, we expect GDP growth to improve to 6.7% in FY25 under our base case scenario. Factors such as anticipated RBI rate cuts, lower crude oil prices, and a normal monsoon are expected to support growth,” the report added.

Agricultural growth is also likely to rise, as higher reservoir levels bode well for rabi crop output. This, in turn, is expected to boost farm incomes and rural consumption.

Additionally, increased agricultural production is likely to alleviate pressure on food inflation during the remainder of the current fiscal, which could further enhance discretionary consumption.

(Inputs from IANS)