| Company | Value | Change | %Change |
|---|
While the growth estimate appears to have been recalibrated on the lower side of the earlier growth range, the government’s commentary on the domestic economy’s health is positive.
It says rural demand remains resilient as reflected in 2, 3-wheeler and tractor sales and urban demand is picking up with robust growth in passenger vehicle sales and air passenger traffic. Consequently it “expects the economy to grow at around 6.5% in real terms in FY25”.
Outlook for the third quarter is bright, farm sector outlook is optimistic and hopefully, food price pressures will decline gradually, the finance ministry observes. “Therefore, there are good reasons to believe that the outlook for growth in H2 of FY25 is better than what we have seen in H1”, during which GDP expanded by 6%.
H1 Slowdown On Softer Capex, Monetary Policy Stance, Salaries & Hiring
While analysing reasons for the slowdown in H1, the ministry says investment growth slowed down on softer public and private capex due to global uncertainties, excess capacity, and fears of dumping.
The monthly economy report for November also says the possibility of structural factors contributing to the slowdown in the first half cannot be ruled out. The finance ministry says, “The combination of monetary policy stance and macroprudential measures by the central bank may have contributed to the demand slowdown”. Welcoming the CRR cut by the RBI the government says, “That should help boost credit growth, which has slowed a little too much and quickly in FY25”, adding “Hiring and compensation practices in the corporate sector have also played their part in slowing urban consumption growth”.
FY26 Outlook Bright For India But Rethink On Us Interest Rates Will Weigh Heavily
While noting India’s growth outlook for FY26 and the coming years are bright based on economic fundamentals, the economy will also be subject to fresh global uncertainties.
Like uncertain global trade growth and the threat of stock markets remaining irrational for longer hangs over global markets.
In addition, a rethink on the path of policy rates by the US, “will weigh on the minds of monetary policymakers in emerging economies, India included”, especially given the fact that emerging market currencies having weakened against the US dollar.
