India forecasts slowing growth ahead of next budget
The world's fifth-largest economy posted 8.2% GDP growth in the 2023-24 financial year but has slowed down since due to lower infrastructure spending, a weaker manufacturing sector and muted urban consumption
India's economy will grow 6.3-6.8% in the next fiscal year, a government report said on Friday, among the top-performing countries globally but sluggish compared with recent performance.
The world's fifth-largest economy posted 8.2% GDP growth in the 2023-24 financial year but has slowed down since due to lower infrastructure spending, a weaker manufacturing sector and muted urban consumption.
"Looking ahead, India's economic prospects for FY26 are balanced. Headwinds to growth include elevated geopolitical and trade uncertainties and possible commodity price shocks," the Finance Ministry said in its annual economic survey.
Keep updated, follow The Business Standard's Google news channel
The lower end of the predicted range comes just below the 6.4% GDP growth projection for the current financial year ending March 2025, which is the slowest the economy has expanded since the Covid-19 pandemic.
It is, however, in line with global estimates including the World Bank, which has forecast growth of 6.7% next fiscal year.
The report said that, while an uptick in rural demand and an easing of food inflation offered an "upside to near-term growth", India will need to improve its global competitiveness to "reinforce its medium-term growth potential".
The report comes a day before India is set to unveil its annual budget, with the spotlight on how Prime Minister Narendra Modi will address the slowdown.
Analysts say efforts to stimulate demand are likely.
"In a quest to support consumption, we expect the finance minister to provide an effective personal income tax rate cut by further tweaking the tax slabs," analysts at Barclays said in a note last week.
"We think a boost to consumption is needed, especially with private investment also now awaiting the increase in demand growth."
Modi was nonetheless upbeat in brief public remarks made on Friday to open the latest session of parliament ahead of Saturday's budget.
He said India was on track to become a developed country by 2047, a mantra of his government, the year coinciding with a century since the end of colonial rule by Britain.
Modi also offered a prayer to Lakshmi, the Indian goddess of wealth and prosperity, exhorting her to continue to bless India's "poor and middle-class".
