The World Bank on Thursday raised India’s economic growth forecast for the current fiscal year, ending in March 2025, to 7% year-on-year, up from April’s estimate of 6.6%. This improvement is driven by a rebound in agricultural output and increased private consumption.
“You have an emerging class of consumers in India that’s driving the economy forward. There are also recoveries from crises in Sri Lanka and Pakistan, alongside a tourism-led recovery in Nepal and Bhutan,” Martin Raiser, World Bank Vice President for South Asia, told Reuters.
On Wednesday, the RBI’s rate-setting panel retained its real Gross Domestic Product (GDP) forecast at 7.2% for FY25. The RBI revised its quarterly growth projections, with Q2 growth forecast reduced to 7% (from 7.2%), Q3 raised to 7.4% (up from 7.3%), and Q4 kept steady at 7.4%. For Q1 FY26, the growth rate is projected at 7.3%.
Meanwhile, the central bank left its inflation forecast for this fiscal year unchanged at 4.5%, despite caution over rising food prices and geopolitical tensions that could disrupt energy supplies and push crude prices higher.
“The MPC noted that the domestic growth outlook remains resilient, supported by domestic drivers – private consumption and investment. This provides headroom for monetary policy to focus on the goal of attaining a durable alignment of inflation with the target,” said RBI Governor Shaktikanta Das.
India’s central bank projection underscores the strength of the country’s macroeconomic fundamentals, with private consumption and investment playing a crucial role. The IMF has also revised India’s GDP growth upwards to 7.0%, citing improved prospects for private consumption, particularly in rural areas.
