India’s GDP forecast to grow 6.5% in FY24-25 amid pre-election spending

Analysts are projecting a robust growth trajectory for India’s economy, with the Gross Domestic Product (GDP) expected to expand to 6.5% in the fiscal year 2024-25. This uptick is attributed to increased government spending ahead of elections and a surge in post-election private investments.

According to a recent analysis by Goldman Sachs, the Indian economy is set to experience a slight deceleration from an estimated growth rate of 6.4% in 2023 to 6.3% in 2024. However, the firm anticipates that the growth will regain momentum, reaching 6.5% in FY25. This growth is anticipated despite ongoing supply shocks and macroeconomic resilience that are likely to keep headline inflation above the target at around 5.1%.

In addition to GDP growth, Goldman Sachs forecasts a narrowing of India’s fiscal deficit. The deficit is expected to decrease from nearly six percent of GDP in FY24 to about five percent in FY25. This improvement will be a key factor in the country’s economic stability.

The current account deficit, however, is projected to rise to nearly two percent of GDP, driven by higher oil prices and persistent supply shocks that contribute to inflationary pressures. Despite these challenges, Goldman Sachs predicts that headline inflation will remain just above five percent year-over-year, with core inflation anticipated to drop slightly below this level compared to last year’s figures.

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