India’s Growth Becoming More Balanced as Private Consumption’s Share in GDP Rises

India’s economic growth is becoming more balanced with a notable rise in private consumption’s share in the GDP, according to a Crisil report. The report highlights a mild revision of 10 basis points (bps) in the second advanced estimate, bringing the expected real GDP growth for fiscal 2025 to 6.5%. This figure is closer to the average growth rate of 6.6% seen in the decade preceding the pandemic.

“This increase follows a sharp upward revision of 100 bps in the previous year’s growth to 9.2%,” said Dharmakirti Joshi, Chief Economist at Crisil. “We expect GDP growth at 6.5% next fiscal, supported by normal monsoons, lower food inflation, and rate cuts of 75-100 basis points in the current cycle that began earlier this month.”

As anticipated, public and household investments were the faster-growing investment components in fiscal 2024. However, the financial flexibility and low leverage that corporates enjoy have yet to translate into healthy investments.

*Challenges in the Corporate Sector*

The ongoing tariff wars and concerns about dumping from China have kept the corporate sector cautious about investments. “The complexity of risks from tariff actions—already initiated and likely to be followed by more such measures in the coming months—is evolving and creates a downside bias to our forecasts,” Joshi added.

Despite these challenges, India’s GDP growth accelerated to 6.2% in the third quarter (October-December) of fiscal 2024-25, up from a revised figure of 5.6% in the second quarter. The growth rate for the financial year 2024-25 is now estimated at 6.5%, while the economic growth rate for 2023-24 has been revised to a 12-year high of 8.2%.

*Fiscal Deficit Concerns*

Meanwhile, the fiscal deficit for the first 10 months of the current financial year (April-January) stood at Rs 11.70 lakh crore, or 74.5% of annual estimates. This figure underscores the need for continued fiscal prudence and effective management of public finances.

As India navigates these economic challenges and opportunities, the balanced growth driven by increased private consumption and strategic investments will be crucial in sustaining the nation’s economic momentum.

Stay tuned for further updates on India’s economic progress and fiscal policies.