Significant increase in capital expenditure by the government, support for infrastructure projects and provision of interest-free loans to states are also important factors for growth, CRISIL has explained.
Indian GDP
The Indian economy will grow at an average rate of 6.7 percent during the fiscal year 2024 to 2031, the credit rating agency CRISIL has predicted in its latest report. The report also said that this rate will remain constant during this period. This rate is higher than the growth rate of 6.6 percent during the pre-Covid pandemic.
Capital expenditure will play an important role in this growth, and at a time when the private sector was reluctant to make substantial investments, the government’s significant increase in capital expenditure has enabled the Indian economy to gain the status of a fast-paced economy. Significant increase in capital expenditure by the government, support for infrastructure projects and provision of interest-free loans to states are also important factors for growth, CRISIL has explained.
After achieving a robust 7.3 percent growth in the current fiscal, it is projected to grow to 6.4 percent in the next fiscal. The impact of the war in West Asia, the impact on the supply chain, the increased cost of cargo due to the attacks in the Red Sea should also be taken into account, the report said.
Inflation in the country was 5.7 percent in December 2023 due to increase in prices of vegetables and food grains. Due to this inflation, the Reserve Bank of India will maintain a cautious policy on interest rates to meet the four percent inflation target. The US Federal Reserve is also expected to cut interest rates this year.
The report also said that due to global uncertainty and higher-than-expected inflation, the timing and extent of expected rate cuts in the coming year cannot be concretely predicted.
Finance Ministry estimates
The Finance Ministry expects the economic growth rate to be higher than the Reserve Bank’s estimate of seven percent. However, the rate is expected to remain close to seven percent next year, in fiscal 2025, CRISIL said. Organizations such as the International Monetary Fund and the World Bank have pegged the gross domestic product (GDP) growth rate at 6.3 to 6.4 percent. India can aspire to become a $7 trillion economy by 2030, says the finance ministry’s monthly economic review released on January 30.
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