India continues to hold steady despite global uncertainties: CareEdge Ratings
Dec 15, 2024
New Delhi [India], December 15 : CareEdge Ratings expects the central government to continue on the path of fiscal consolidation and projects India's GDP growth to moderate but remain healthy at 6.5 per cent in the current financial year.
For the next financial year, 2025-26, it pegged India's GDP growth at 6.7 per cent, in a webinar held on Economic and Sector Outlook for 2025.
Despite global uncertainties, CareEdge Ratings asserted that India will continue to hold steady in 2025.
The Reserve Bank in its latest monetary policy had cut India's growth forecast to 6.6 per cent from 7.2 per cent.
Sachin Gupta, Chief Rating Officer and ED, CareEdge Ratings, said that the first half of 2024-25 paints a picture of cautious optimism within India's corporate sector.
"Amid the uncertain global environment, there is a lingering hesitancy among businesses to commit to long-term investments, as the anticipated boost in private capital expenditure is yet to materialise. However, we expect to see improvement in private investment in 2025, supported by anticipated monetary policy easing," said Gupta.
Rajani Sinha, Chief Economist, CareEdge Ratings said that the contraction in public capital expenditure, prolonged monsoon and weakening urban demand impacted growth momentum in the first half of 2024-25.
"But we can expect the economic growth in H2 FY25 to rebound, supported by the recovery in consumption and a pick-up in government capex. Healthy agriculture production and robust services sector performance will be supportive of a rebound in GDP."
According to CareEdge Ratings, CPI inflation is expected to moderate in the coming quarters.
It expects food inflation to moderate, driven by a strong kharif harvest and favourable conditions for rabi sowing. The average CPI inflation is projected at 4.8 per cent in 2024-25 and 4.5 per cent in 2025-26.
Core inflation is expected to remain benign, averaging 3.5 per cent in 2024-25 and 4.3 per cent in 2025-26. And WPI inflation is anticipated to average 2.5 per cent in 2024-25 and 3 per cent in 2025-26.
As far as government finances are concerned, net revenue collection will be aligned with the budgeted target. The weak corporate tax collection will be compensated by healthy income tax collection for the year. On the expenditure side, the Centre's capex is likely to fall short of target by Rs 1.5 trillion.
With lower capex, CareEdge Ratings project the fiscal deficit for 2024-25 at 4.8 per cent of GDP, marginally lower than the budgeted 4.9 per cent.
CareEdge Ratings believes that the manageable CAD and high forex reserves should support rupee. However, a strong dollar and weak yuan are likely to put some weakening pressure.
CareEdge Ratings expects Rupee to trade around 84 by end of 2024-25 and between 84-86 by end of 2025-26.
CareEdge Ratings expects RBI to cut policy interest rate by 50-75 basis points in 2025, as food inflation moderates.
