India's economic outlook optimistic for FY25, RBI report forecasts GDP growth at 6.6 pc

India's economy is expected to grow 6.6% in 2024-25, driven by rural consumption, government spending, and services exports, with the RBI forecasting a rebound in growth in Q3 and Q4.

New Delhi: India's economy is poised for a robust growth of 6.6% in 2024-25, driven by a resurgence in rural consumption, government spending, and investment, as well as strong services exports. This optimistic outlook is underscored by the Reserve Bank of India's (RBI) December 2024 issue of the Financial Stability Report (FSR), which highlights the Indian financial system's resilience and stability.

The RBI report notes that scheduled commercial banks (SCBs) have bolstered their soundness, boasting strong profitability, declining non-performing assets, and robust capital and liquidity buffers. Return on assets (RoA) and return on equity (RoE) have reached decadal highs, while the gross non-performing asset (GNPA) ratio has plummeted to a multi-year low.

Despite a moderate 6% real GDP growth in the first half of 2024-25, the RBI expects growth to rebound in Q3 and Q4, driven by domestic drivers, public consumption, investment, services exports, and favorable financial conditions. The RBI's forecast is underpinned by the economy's structural growth drivers, which remain intact.

On the inflation front, the RBI forecasts a disinflationary effect due to a bumper kharif harvest and promising rabi crop prospects, which should soften foodgrain prices. However, extreme weather events, geopolitical conflicts, and geo-economic fragmentation pose risks to food inflation dynamics and global supply chains.

The FSR report underscores the Indian economy's resilience, stability, and potential for robust growth, despite potential challenges. With its strong banking sector, favourable economic growth prospects, and manageable inflation, India's economy is poised for a bright future.