India's economic growth expected to accelerate in 2nd half of 2024-25: Report

The Indian economy is expected to pick up growth momentum in the second half of the current financial year with high-frequency indicators such as digital payments, power demand, service PMI, air passenger traffic, rising toll and GST collections suggesting a recovery is already underway, according to a Bank of Baroda report released on Saturday.

The agriculture sector is expected to register a robust growth of 3.8 per cent in FY25, up from 1.4 per cent in FY24. So far, rabi sowing has been higher compared with last year and bodes well for agriculture growth.

GST collections too rose by 8.3 per cent in Q3 FY25, indicating a pickup in consumption demand.

The better agricultural prospects will give a fillip to rural demand, while reports also indicate a recovery in urban demand. Inflation is likely to have edged down in December 2024 and is expected to further moderate in the coming months. However, the depreciation of the rupee poses a key risk.

"Some degree of uncertainty is likely to prevail in the global and domestic financial system until there is more clarity on US policies under the new President. We remain cautiously optimistic on India's growth prospects in 2025," the report said.

Some high-frequency indicators have indicated a pick-up in demand with an uptick noted in digital payments, power demand, electronic imports and fertiliser sales. However, total PV sales were lower owing to post-festive inventory and limited new launches, the report pointed out.

On the rural front, two-wheeler sales also witnessed a sharp drop due to cash flow issues and a shift towards the EV market. Notably, the first advance estimates have pegged private consumption growth at 7.3 per cent in FY25 against 4 per cent in FY24, raising the possibility of a steady pickup in the coming months, the report observes.

It also points out that the Centre's fiscal deficit was stable at 5.1 per cent as of November 24 (12 Money Market Account basis). Till November 2024 Fiscal Year to Date (FYTD) basis, total expenditure rose by 3.3 per cent, an unchanged pace from October 24.

Within this, while revenue expenditure growth slowed (7.8 per cent versus 8.7 per cent as of October 24), a decline in capex eased (- 12.3 per cent versus -14.7 per cent). On the income side, the Centre's net revenue growth was also stable at 8.7 per cent as of November 24.

Within this, while direct tax collections improved (12.1 per cent versus 11.1 per cent), indirect tax collections growth slowed a tad (9.2 per cent versus 10.5 per cent). Non-tax collections held ground, the report further pointed out.