Strong Domestic Demand To Drive 6.5% GDP Growth In FY25: RBI Bulletin

(MENAFN- KNN India) New Delhi, Mar 24 (KNN) India's economy has demonstrated remarkable resilience amid escalating global trade tensions and geopolitical uncertainties, according to the Reserve Bank of India's March 2025 bulletin.

Despite volatile international conditions, the nation is projected to maintain a robust GDP growth rate of 6.5 per cent for fiscal year 2024-25, as indicated by the National Statistical Office's Second Advance Estimates.

The third quarter witnessed a GDP growth of 6.2 per cent, rebounding from 5.6 per cent in the previous quarter, driven primarily by increased private consumption and government spending. Construction, trade, and financial services have emerged as the key sectors fueling this growth momentum.

The employment landscape also shows positive trends, with manufacturing employment growing at the second-fastest rate since the Purchasing Managers' Index survey began, while the services sector similarly experienced significant expansion in workforce numbers.

Inflation has shown signs of moderation, with Consumer Price Index inflation falling to a seven-month low of 3.6 per cent in February 2025, largely attributed to declining vegetable prices.

However, core inflation, which excludes food and fuel components, rose to 4.1 per cent, indicating persistent underlying price pressures that merit continued attention from monetary authorities.

On the external front, India's export performance remained largely flat, growing marginally by 0.1 per cent to USD 395.6 billion from April 2024 to February 2025. February specifically saw a 10.9 per cent year-on-year decline in merchandise exports, reflecting weak global demand.

Meanwhile, imports increased by 5.7 per cent to USD 656.7 billion over the eleven-month period, though February recorded a 16.3 per cent decline, contributing to a narrowing trade deficit.

The financial sector has demonstrated stability despite sustained foreign portfolio investor outflows putting pressure on stock markets and the rupee. Domestic investors have stepped in to increase their holdings, helping to stabilise market structures.

The RBI has employed various tools including open market operations, daily repo auctions, and dollar/rupee swaps to effectively manage liquidity amid capital outflows.

Agricultural production offers a bright spot, with foodgrain output for 2024-25 estimated at 330.9 million tons, marking a 4.8 per cent increase from the previous year.

This growth has been balanced across seasons, with kharif production up 6.8 per cent and rabi up 2.8 per cent. Infrastructure activity remains robust, evidenced by double-digit growth in toll collections and E-way bills, supported by continued government investment in development projects.

The global economic environment presents significant challenges, with growth momentum slowing due to increased protectionism and trade restrictions.

US-China tariff escalations could potentially reduce US GDP growth by 0.6 percentage points in 2025, while the Organisation for Economic Co-operation and Development has lowered its global GDP forecasts to 3.1 per cent for 2025 and 3.0 per cent for 2026 due to slowing demand.

Financial markets worldwide have experienced volatility, with the US dollar losing gains made since November 2024 and gold prices reaching a record high of USD 3000 per ounce as investors seek safe-haven assets.

Despite these global headwinds, India's economy remains well-positioned for continued growth, bolstered by strong domestic demand and proactive policy measures. The RBI's management of liquidity and inflation expectations has played a crucial role in maintaining economic stability.

However, persistent risks include trade disruptions, financial market volatility, and potential currency depreciation. Sustained policy support and domestic economic resilience will be essential for maintaining growth momentum in the coming quarters.

(KNN Bureau)

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