Growth momentum to continue in FY25, Agriculture growth likely to be better: Sources
May 31, 2024
New Delhi [India] May 31 : Riding on 8.2 per cent GDP growth, along with a record dividend of Rs 2.1 lakh crore from the Reserve Bank of India, the government has the option of lowering the fiscal deficit target of 5.1 per cent in FY25.
Government sources told ANI that the decision to lower fiscal deficit target or not will be taken and announced in the main budget in July.
They said that with IMD predicting a good monsoon, the agriculture sector growth is expected to be better in the current financial year. The manufacturing sector is also expected to continue its growth momentum. Before 2020, companies had balance sheet issues and the growth was stagnant. Now, they are catching up.
"Improved health of banking sector will lead to a growth in bank credit, which will boost growth in FY25. Growth projections indicate India will grow by 7 per cent in FY25." sources said
No major economy of the world is even near to India's GDP growth of 8.2 per cent in FY24. India's growth of 7.8 per cent between January-March 2024 is far more than other major economies of the world. Nearest to India is China with 5.2 per cent growth, Indonesia at 5.1 per cent, the United States at 3 per cent, France at 0.9 per cent and the UK at 0.2 per cent are way behind. Japan and Germany showed a negative growth of -0.2 per cent and -0.9 per cent respectively.
Sources added that growth momentum will continue in FY25 "Domestic economic activity remains resilient, backed by strong investment demand, upbeat business and consumer sentiments, the robust corporate and bank balance sheets."
The growth in the gross value added (GVA) in the agriculture sector was 1.4 per cent in FY24, against 4.7 per cent in FY23. But agriculture played a major role in 8.2 per cent overall GDP of FY24, against the prediction of 7.6 per cent. Source told ANI that agriculture growth of 1.4 per cent is double of 0.7 per cent predicted in February. The manufacturing GVA grew by 9.9 per cent in FY24 due to the low base effect with a negative growth of 2.2 per cent in FY23.
Sources further added that GDP data shows that the private non-financial gross fixed capital formation has picked up pace in the past two years, with a growth of 4.6 per cent of compounded annual growth rate (CAGR) in the period of January-March 2024.
"For the rest of the decade, barring the geopolitical disturbances, private capital expenditure will be an important driver of growth and employment," the source said.
Sources indicated that a full economic survey would be published before the main Budget of July. The government, sources said, is tracking shipping rates due to the ongoing Red Sea crisis as shipping disruptions could have implications in capital formation.
But there are some downside risks to the economy as well which include the rising retail exposure to stocks through direct stock investments. The derivatives positions keep household savings rate from recovering, but it is not a systemic risk, sources said.
The source further said that the government's continued push on capital expenditure and strategic trade agreements like India-EFTA and economic partnership agreement (TEPA) will add to growth prospects in FY25.
