New Delhi, Dec 26 (Mayank Nigam) Noting that Indian economy would perform better in the second half of the current fiscal (H2FY25) than in the first half (H1), a Finance Ministry report released on Thursday said that the economy is expected to grow at around 6.5% in real terms for the full financial year. The Monthly Economic Review (MER) for the month of November 2024 said that while rural demand has remained resilient, urban demand is picking up. “Consequently, we expect the economy to grow at around 6.5 percent in real terms in FY25,” the report said. The report highlighted 23.2% and 9.8% growth in two & three-wheeler sales and domestic tractor sales, respectively during October-November period of 2024 to suggest that rural demand remains strong.
A healthy 13.4% growth in passenger vehicle sales during the same period points to pick-up in urban demand. Looking further ahead into FY26, the report noted the build-up of global risks. It highlighted the uncertainty with respect to the growth in global trade next year. “Therefore, India’s growth outlook in FY26 for the coming years is bright when viewed through the lens of Indian domestic economic fundamentals, but is also subject to fresh uncertainties,” it said. India’s gross domestic product or GDP grew at 5.4% percent in July-September quarter (Q2) of FY25, resulting in a growth of 6% in H1 of FY25. There are however signs of capital formation growth rebounding early in H2 of FY25, with Union Government capex picking up pace.
The order books of infrastructure and capital goods grew sharply in FY24 and H1 of FY25, indicating a pent-up investment impulse that will play out in the quarters ahead. “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,” the report said. The report noted that hiring and compensation practices in the corporate sector have also played their part in slowing urban consumption growth.