India to grow at 6.5% this financial year, says report

The Indian economy is likely to grow at 6.5 per cent in the fiscal year starting April 1, EY Economy Watch said, emphasising that a well-calibrated fiscal strategy that supports human capital development while maintaining fiscal prudence could significantly enhance long-term growth prospects.

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The March edition of EY Economy Watch projects India's real GDP growth at 6.4 per cent in FY25 (April 2024 to March 2025 fiscal year). For the next, it projects 6.5 per cent growth, highlighting the need to realign fiscal policy to support the country's journey towards Viksit Bharat.

According to revised national accounts data released by NSO last month, real GDP growth rates for FY23 to FY25 are now estimated at 7.6 per cent, 9.2 per cent and 6.5 per cent.

With respect to quarterly growth rates for FY25, the third quarter growth is estimated at 6.2 per cent implying a required growth of 7.6 per cent in the fourth quarter to deliver an annual GDP growth of 6.5 per cent estimated by NSO.

"A 7.6 per cent growth in the last quarter will require a 9.9 per cent growth in private final consumption expenditure. Such a high growth has not been experienced in recent years," the report said. "An alternative to this is to increase investment expenditure, where the government's capital expenditure growth plays a critical role."

It said the fiscal deficit of the government as per the revised estimates may be affected by any subsequent supplementary demand for grants. The higher level of nominal GDP may provide some cushion for absorbing some of these supplementary increases when fiscal deficit is