January 29, 2024 / 10:37 AM IST
Sensex Today | Suman Chowdhury, Chief Economist and Head-Research:
We expect the Indian economy to witness a moderation in growth in FY25. Our current forecast for FY25 stands at 6.3% as compared to 6.8% in FY24. Given the priority that is likely to be given for fiscal consolidation in the upcoming budget, we don’t expect any significant fiscal stimulus in it. However, the government may continue to earmark a significant quantum for capital expenditure with a growth of 15% in its budgetary allocation; the latter will continue to be a primary driver of the domestic economy over the medium term.
The government may also enhance the subsidy allocation for some segments such as farmers, women, informal sector workers and unemployed youth to strengthen domestic private consumption which is estimated to show a weak growth of 4.4% in FY24. Given the need to sustain the public investments and also support certain social segments through subsidies or budgetary relief, the targeted reduction of fiscal deficit from 5.9% to 5.3% (E) will pose a material challenge for the finance ministry, necessitating significant step-up in non-tax revenues like PSU disinvestments.
The macro fundamentals remain strong and resilient and this is borne out by the GDP figures so far in the current year despite headwinds like the global slowdown, higher interest rates and the El Nino phenomenon. However, the policymakers need to take remedial measures to revive the weak rural demand scenario if agricultural growth doesn’t recover quickly.
