The main macro drivers remain healthy and India’s GDP growth is likely to move closer to the trend growth of 6.5-7 per cent this fiscal, a Crisil Insight report said .
Trend GDP growth is the average sustainable rate of economic growth over time. Private consumption growth in the country has fared better than last year in the first half of the current fiscal (FY25).
“While investment growth has moderated relative to last year, its share of GDP remains higher than the pre-pandemic decade,” the report mentioned.
Technical factors contributed to an above-trend GDP growth last year. They are expected to have a moderating effect on GDP growth this current fiscal as they normalise.
“GDP growth had averaged 6.6 per cent in the pre-pandemic decade. This fiscal is likely to see GDP growth move closer to trend growth of 6.5-7 per cent,” according to the report.
It is worth noting that the main macro drivers of growth remain healthy. Private consumption grew 6.7 per cent on average in the first half of this fiscal, compared with 4.1 per cent in the corresponding period last year. Its share in GDP at 56.3 per cent this fiscal has been higher than 56.1 per cent in the pre-pandemic decade.
The Wholesale Price Index (WPI) inflation has also been normalising. The last fiscal saw a decline in WPI inflation to -0.7 per cent. This fiscal WPI inflation has averaged 2.7 per cent, closer to the pre-pandemic 5-year average of 3.2 per cent.
In November, India’s annual rate of inflation based on WPI eased to 1.89 per cent, compared to 2.36 per cent in October, as the rise in food prices slowed during the month with the fresh crop arriving in the market.
“We expect improving consumption demand to drive growth momentum this fiscal. In particular, agriculture and rural demand are poised to improve after a healthy monsoon. This means growth will be more balanced this fiscal, even if it is lower than last year,” said the Crisil report.
