The year 2024 can be characterized as a "strong start, weaker finish" for India's economy. It started with Goldilocks-like settings, with real gross domestic product (GDP) growth closer to 8 percent and gradually easing inflation. In the last few months, however, policy tradeoffs have worsened, due to a sharper-than-expected slump in GDP growth, higher food inflation, and currency depreciation pressures. As we turn the page, what does 2025 hold in store?
The global backdrop appears challenging: Uncertainty remains high due to Trump 2.0 policies. We expect President-elect Donald Trump to strike fast and hard on imposing tariffs, leading to a pickup in US inflation and just one Fed cut, in March, followed by a pause for the remainder of 2025. China is likely to announce more fiscal stimulus, but this is unlikely to drive a sustainable recovery, given the economy is not in a normal downcycle. These factors could slow global GDP growth to 2.9 percent year-on-year in 2025, down from 3.2 percent in 2024. For India, this implies reduced dependence on exports as a growth engine and increased reliance on domestic demand.
Cycling down on growth: Many believe the surprise slump in GDP growth to 5.4 percent in Q2 FY25 was a one-off, and the economy will bounce back to 6.5-7.0 percent over coming quarters, supported by higher government spending and a rural recovery. This looks difficult.
This story is from the December 24, 2024 edition of Business Standard.
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This story is from the December 24, 2024 edition of Business Standard.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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