Industrial Growth in India Set to Surge, Inflation Anticipated to Diminish in the Latter Half of 2024-25: Report
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New Delhi, Dec 13 (NationPress) India’s industrial activity is projected to gain momentum in the latter part of the current fiscal year, driven by a rebound in consumption demand and a surge in export growth, while inflation is anticipated to decline, as highlighted in a CRISIL report released on Friday.
“Up until now, high food inflation, elevated interest rates, and a slowdown in credit growth have hindered the recovery of consumption. However, with food inflation beginning to show signs of relaxation, there will be more room for discretionary spending,” the report notes.
Furthermore, the rural economy is expected to improve due to robust agricultural production this year, according to the report.
Conversely, the urban economy is experiencing diminishing support from credit growth amidst high interest rates. A decrease in government fiscal impulse is also likely to have a moderating effect on GDP growth. While government capital expenditure is forecasted to bounce back in the latter half of this fiscal year, growth is anticipated to slow in comparison to the previous fiscal year. A revival in private investment is essential to maintain the investment momentum, the report emphasizes.
Global trade is predicted to enhance and bolster export growth this year. Nevertheless, geopolitical tensions pose a risk to trade flows and supply-chain stability for the industry. Exports will need to navigate heightened uncertainties stemming from the potential for a US-China tariff conflict next year, according to the report.
In summary, high interest rates and fiscal consolidation are expected to decelerate GDP growth this fiscal year. We forecast GDP growth at 6.8 percent year-on-year for this fiscal compared to 8.2 percent in the preceding fiscal year, with downward risks.
In the upcoming weeks, we anticipate food prices to decline incrementally. Vegetable prices traditionally decrease in December as the kharif crop enters the market. A high base from last year will also assist in reducing inflation, given that vegetable prices did not experience their seasonal drop last year. However, vigilance regarding edible oil prices is necessary.
Considering the subdued domestic demand and soft global prices, non-food inflation is projected to remain moderate for the remainder of the fiscal year, according to the report.
“In general, we foresee inflation to soften in the coming months, primarily driven by food inflation; yet, the rigidity in vegetable and edible oil prices maintains considerable upward pressure. In our base case, we predict inflation to average 4.6 percent this fiscal year with some upward bias to the forecast and anticipate a policy rate cut in February,” the report concluded.
