The Reserve Bank of India has forecast a recovery in India's growth trajectory in the second half of FY25, driven by robust rural demand, a historic high in foodgrain production and various other factors. Government investments in infrastructure are expected to boost economic activity and spur investment, according to the central bank's monthly release. Nevertheless, potential global challenges could pose risks to the growing prospects for growth and inflation.
RBI said: “India's growth trajectory is poised to lift in the second half of 2024-25, driven mainly by resilient domestic private consumption demand. Rural demand, in particular, is accelerating, supported by record levels of foodgrain production.”
An article in the December Bulletin discussing the current state of the global economy highlighted its resilience with steady growth and controlled inflation. According to high-frequency indicators (HFIs) for the third quarter of 2024-25, the Indian economy is showing signs of recovery after a slowdown in momentum in Q2. Strong festival activity and continued increase in rural demand have led to this recovery.
India's economic growth rate experienced a significant slowdown to its lowest level in nearly two years, which has had a negative impact on the overall outlook for the year. The country's gross domestic product has grown by 5.4% in the third quarter of the current financial year compared to the same period last year.
The RBI pointed out that India's continued growth prospects, fueled by positive climate initiatives such as renewable energy, electric vehicles (EVs), green hydrogen and efforts to establish a carbon market, are aligned with a more sustainable foundation.