Projected Acceleration of India's Economic Growth in H2 2024-25: Analysis

New Delhi, Jan 11 (NationPress) The Indian economy is projected to gain momentum in growth during the second half of the ongoing financial year, supported by high-frequency indicators such as digital payments, power demand, service PMI, air passenger traffic, and rising toll and GST collections, which signify that a recovery is already in progress, according to a report from Bank of Baroda released on Saturday.

The agriculture sector is anticipated to demonstrate a strong growth rate of 3.8 per cent in FY25, an increase from 1.4 per cent in FY24. Current rabi sowing levels are higher than last year, which bodes well for agricultural growth.

Moreover, GST collections have also risen by 8.3 per cent in Q3 FY25, indicating a rebound in consumer demand.

Improved agricultural prospects are likely to stimulate rural demand, while reports also point to a recovery in urban consumption. Inflation is expected to have decreased in December 2024 and is predicted to further decline in the coming months. However, the depreciation of the rupee remains a significant risk factor.

According to the report, "Some degree of uncertainty is likely to persist in both the global and domestic financial systems until clearer guidelines emerge regarding US policies under the new President. We maintain a cautiously optimistic outlook on India's growth prospects for 2025."

Several high-frequency indicators have suggested an increase in demand, with a notable rise in digital payments, power demand, electronic imports, and fertilizer sales. However, total PV sales have declined due to post-festive inventory levels and a lack of new launches, as highlighted in the report.

On the rural front, sales of two-wheelers experienced a significant decline due to cash flow challenges and a transition towards the EV market. Notably, the first advance estimates project private consumption growth at 7.3 per cent in FY25 compared to 4 per cent in FY24, suggesting a potential steady increase in the coming months, as observed in the report.

The report also notes that the Centre's fiscal deficit remained stable at 5.1 per cent as of November 24 (12 Money Market Account basis). As of November 2024, total expenditure has increased by 3.3 per cent, maintaining the same pace as observed in October 24.

Within this context, while the growth of revenue expenditure has slowed (7.8 per cent versus 8.7 per cent as of October 24), a decrease in capex has softened (-12.3 per cent versus -14.7 per cent). On the income side, the Centre's net revenue growth was also stable at 8.7 per cent as of November 24.

Within this, direct tax collections improved (12.1 per cent versus 11.1 per cent), while the growth of indirect tax collections has slightly slowed (9.2 per cent versus 10.5 per cent). Non-tax collections have remained stable, as further noted in the report.