India's GDP growth expected to be around 7% in FY25: Care Ratings

The country’s economy performed well in FY24 and the agricultural sector's muted growth of 1.4 per cent in the last fiscal is in line with expectations due to a poor monsoon, it said.

A sharp increase in gross fixed capital formation, led by public capital expenditure, supported the growth in FY24. However, private consumption growth remains subdued, increasing by only 4 per cent in FY24, which is the slowest rate in the last two decades, excluding the contraction during the pandemic year of FY21.

A strong corporate and banking sector balance sheet, robust credit growth and the ongoing moderation in the inflationary pressures would support domestic economic momentum, the rating agency noted.

Expectations of a normal monsoon bode well for overall consumption demand.

Moderation in food inflation would also be critical for a broad-based improvement in consumption trends.

The upswing in the private investment cycle would be contingent on a sustained improvement in domestic consumption and global growth outlook.

While overall domestic economic momentum remains strong, monitoring the ongoing recovery in private consumption demand is important, especially at the bottom of the pyramid, it observed.

Fibre2Fashion News Desk (DS)