India Ratings and Research has adjusted its GDP growth forecast for FY25 to 7.1 percent, up from the previous estimate of 6.5 percent. This revision slightly exceeds the Reserve Bank's projection of 7 percent. The agency attributes this upward revision to robust government capital expenditure, improved corporate and banking sector balance sheets, and the beginning of a new private corporate investment cycle.

However, certain factors could impede growth, such as uneven consumption demand and challenges faced by exports due to sluggish global growth. The agency anticipates a significant increase in private final consumption expenditure, rising to 7 percent in FY25 from 3 percent in FY24, marking a three-year high.

Presently, consumption is skewed towards goods and services favored by higher-income households, with rural consumption remaining weak. The agency predicts that factors like a favorable monsoon and increased wheat procurement by the Food Corporation of India will boost consumption.

To achieve a sustainable and widespread recovery in consumption, it emphasizes the necessity of real wage growth for lower-income households. While private sector investment has been subdued in recent years, the agency observes signs of a new investment cycle, as evidenced by increased project loans sanctioned by lenders.

Additionally, the agency expects headline inflation to moderate in FY25, although it anticipates the Reserve Bank to remain vigilant.