‘Economy to grow at 8% in FY25, green shoots visible in rural consumption’

New Delhi: Industry body Confederation of Indian Industry (CII) expects the country's economy to grow at 8% in FY25, its fourth consecutive year of above 7% growth, according to Sanjiv Puri, its newly elected president, who is also chairman and managing director of consumer goods major ITC Ltd. 

The industry body’s projection is notably above the 7.2% growth forecast by the RBI for this fiscal. 

Puri said at a media briefing on Thursday that green shoots are visible in rural consumption. On 7 June, RBI governor Shaktikanta Das, too, had shared expectations of improved farm sector activity and rural consumption this year on the basis of an above-normal monsoon forecast and expected better kharif production.

“The growth estimate hinges critically on addressing the unfinished reform agenda on priority, in addition to improvement in world trade prospects aiding our exports, twin engines of investment and consumption doing well, and expectations of a normal monsoon, among other factors,” Puri was quoted as saying in a CII statement.

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According to CII's forecast, farm sector output is likely to grow at 3.7% in FY25, up from 1.4% in FY24 owing to base effect to some extent. It also expects industry to grow at 8.4% against 9.3% in the year before, and services at 9% compared to 7.9% in the year ended March. Puri explained to mediapersons that in spite of any fluctuations from the year-ago period’s figures, the forecasts for industry and services are very robust. 

“The stellar growth performance, expected during the current fiscal, is propelled by six growth drivers which have pivoted the economy to an accelerator mode,” a statement from CII said quoting Puri.

The participation of private sector investment in the India growth story, public investment in physical and digital infrastructure, well-capitalised banking system, booming capital market and reduced dependence on oil are igniting the India growth story, the statement said, quoting Puri. 

The industry body said quoting its January-March 2024 business confidence survey that three-fourth of the over 200 respondents anticipated an improvement in private capital expenditure in the first half of the current fiscal, compared to the same period a year ago. 

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Gross fixed capital formation, or investments in plant and machinery, by the private sector stood at 23.8% of nominal gross domestic product (GDP) in FY23, higher than the level seen in the pre pandemic years of FY19 and FY20, Puri said at the briefing in a presentation. 

Infrastructure-linked sectors like cement and steel, sectors such as electronic production, food processing and telecom that are benefiting from the government’s production-linked incentives, logistics, renewable energy, automobiles and semi-conductors are witnessing an improvement in private investment levels, Puri said in his presentation. 

According to CII, continued global uncertainty, and ‘higher-for-longer’ interest rates globally resulting in tepid and volatile capital flows are headwinds to India’s growth. Heatwave and other extreme weather events and elevated global commodity prices also could be headwinds to growth, Puri said in his presentation. 

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He also suggested that tax reforms should continue in order to boost the investment climate and the overall competitiveness of the economy. Puri proposed that the government could consider a roadmap for simplifying capital gains tax and tax deducted at source provisions.