India’s Economy to Average 6.7% Growth Through FY25-FY31, Projected to Hit $7 Trillion: CRISIL

Keywords; India GDP growth, $7 trillion economy, CRISIL report, medium-term growth, inflation forecast, fiscal consolidation, capex push.

India’s Economic Outlook: Growth, Inflation, and Challenges Ahead

Key Growth Projections

India’s economy is projected to grow at an average rate of 6.7% between FY2025 and FY2031, according to the ET-CRISIL India Progress Report. By 2031, the country’s GDP is expected to cross the $7 trillion milestone, driven by a combination of:

• A robust capital expenditure (capex) boost.
• Increased productivity growth across sectors.

This growth rate mirrors the 6.6% average achieved in the decade preceding the pandemic, indicating a steady economic trajectory.

Inflation Forecast

Inflation, measured by the Consumer Price Index (CPI), is likely to moderate to 4.5% in FY2024-25, compared to 5.4% in the previous year. Lower food inflation is a key driver of this anticipated easing. However, the report highlights several potential risks:

1. Weather-related disruptions:
   • While kharif sowing has improved, excess and unseasonal rains could disrupt food supply, pressuring prices.
   • An adverse weather event could also impact agricultural income, dampening rural demand.
2. Geopolitical uncertainties:
   • Escalating global tensions may disrupt supply chains, increase oil prices, and raise input costs, affecting inflation and growth forecasts.

Fiscal Policy and Demand Dynamics

The government’s focus on fiscal consolidation—reducing fiscal deficits—is expected to moderate its direct contribution to growth. However, private sector-led investments and public infrastructure projects are expected to sustain momentum.

On the demand side, high interest rates and tightened lending norms are likely to curb urban demand in the short term, with GDP growth for the current fiscal projected at 6.8%.

Challenges and Opportunities

While India’s medium-term outlook appears positive, the report identifies key hurdles:

• Agricultural uncertainties: Dependence on favorable weather for stable food inflation and rural incomes.
• Global risks: Geopolitical conflicts impacting trade and energy costs.

At the same time, India’s focus on digitalization, green energy, and manufacturing exports presents opportunities for sustained growth, especially amid global shifts in supply chains.

Conclusion

India’s economy is poised for strong medium-term growth, anchored by strategic investments and productivity gains. However, vigilance is required to navigate inflation risks, external shocks, and fiscal challenges effectively. Balancing domestic reforms with global opportunities will be crucial in achieving the ambitious $7 trillion GDP target.

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