Government Consumption Growth Projected to Rise in FY25
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Synopsis
The report indicates a positive outlook for government consumption growth in FY25, driven by increased expenditures from state and union governments. Rural demand and easing inflation are expected to support private consumption growth, while exports may see robust performance in services.
Key Takeaways
- Government consumption growth is set to improve in FY25.
- Private consumption will be supported by rural demand.
- Exports are projected to grow significantly.
- India remains the fastest-growing economy in 2025.
- The fiscal deficit target is set at 4.8% for FY25.
New Delhi, Feb 2 (NationPress) The anticipated growth in government consumption for FY25 is expected to improve due to increased revenue expenditures from both state and union governments. Meanwhile, the growth in private consumption is likely to be fueled by rural demand, decreasing inflation, and a favorable base, as noted in a report released on Sunday.
Exports are forecasted to experience robust growth, thanks to a significant rise in services exports, according to PwC's report titled ‘Budget 2025–26: Fostering India’s Inclusive Growth’. This report provides comprehensive insights into budget highlights, economic forecasts, and pivotal tax and regulatory proposals that will influence India's economic landscape in the years ahead.
According to preliminary estimates, India’s economic growth is projected to slow to 6.4 percent in FY2025, down from 8.2 percent growth in FY24. This decline is primarily attributed to reduced urban consumption, high food inflation, sluggish capital formation, and global challenges.
Nonetheless, India is on track to maintain its status as the world’s fastest-growing economy in 2025, bolstered by a vigorous domestic market, a growing working-age population, and strong macroeconomic fundamentals, the report states.
The government aims to surpass its fiscal deficit target of 4.9 percent, estimating it at 4.8 percent for FY2025.
Additionally, a fiscal deficit of 4.4 percent is projected for FY26, reaffirming its commitment to achieving a deficit lower than 4.5 percent by FY26.
The economic survey anticipates growth within the range of 6.3 percent to 6.8 percent in FY26.
“Inflation is projected to stabilize at an average of 4.5 percent in FY26, supported by favorable food inflation due to expected good harvests and a normal monsoon, along with easing commodity prices,” the report reveals.
The exchange rate, which has faced challenges, is expected to improve as the volatility in Foreign Portfolio Investor (FPI) flows diminishes and the softening of crude prices begins to lower the costs of the Indian crude import basket, the report adds.
