Economy to grow at 6.5% this fiscal, H2 shows signs of revival
As agricultural and industrial activity is likely to gain traction, the Centre expects the economy to grow at a rate of 6.5% in FY2024-25 after a moderation in Q2, according to the Finance Ministry’s Monthly Economic Review released on Thursday.
India’s Gross Domestic Product (GDP) growth rate fell to a seven-quarter low of 5.4% in the second quarter of FY25, the third consecutive quarter of slower growth. Also, this was the lowest growth rate in seven quarters. This resulted in a growth of 6% in H1 of FY25.
“The outlook for Q3 appears bright, as reflected in the performance for October and November. An increase in MSP, high reservoir level and adequate fertiliser availability bodes well for the sowing of rabi crops. Industrial activity is also likely to gain traction,” the report stated.
It added the conclusion of the monsoon and expected increase in government capital expenditure are expected to support the cement, iron, steel, mining and electricity sectors. The services sector continues to perform well.
The report said one cannot rule out the possibility that structural factors — monetary policy stance and macro prudential measures by the RBI — may have contributed to the slowdown in first half. But it is good news that the central bank lowered the cash reserve ratio from 4.5% to 4% in its policy meeting this month.
However, for FY26, global trade growth is looking uncertain, while elevated stock markets continue to pose a big risk. The strength of the US dollar and a rethink on policy rates in the US have put emerging market currencies under pressure. So, sustaining growth will require a deeper commitment from all stakeholders.
