It may be a subdued growth in the current financial year, but the Indian economy is projected to grow by 6.8% in the financial year 2025-26, supported by strong high-frequency indicators, according to a report by Bank of Baroda.
The report expects nominal GDP growth to be around 10.5% during the same period. It added 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.
It said, “for FY26, we expect the nominal GDP growth at 10.5% and real GDP growth at 6.8%.” 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 also underlined that investment and consumption will remain critical in sustaining growth momentum in the coming months.
Indian Economy: More Details!
However, the report cautions about downside risks due to global headwinds. Among these, the threat of a tariff war looms large, as the incoming US administration under President Trump may impose protectionist trade policies. Such measures could disrupt global trade and potentially trigger retaliatory actions, posing risks to global economic stability.
It said “A range of economic and strategic risk prevails post the imposition of the tariff policies by the incoming US President Mr Trump. This could be 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 anticipates a rate cut by RBI in its upcoming monetary policy meeting in February 2025, which could further support economic growth.
It said “Focus would also move towards the Union Budget, corporate performance in Q3 and Q4 and RBI’s rate decision, we expect the rate cut action in the next meeting scheduled in Feb’25”
Overall, while challenges remain on the global front, the Indian economy is expected to maintain a steady growth trajectory, supported by strong domestic demand and improving economic indicators.
The year ahead will be crucial in navigating global uncertainties while capitalizing on domestic strengths to sustain the growth momentum.
