Strong Economic Growth in Q1: India’s GDP grew by 7.1% in Q1 FY2024-25, driven by robust domestic consumption and investment activities. Projected GDP growth for FY2024-25 remains strong, with key institutions forecasting growth between 6.5% and 7.3%.
Inflation Remains Under Control: Annual consumer inflation dropped to 3.5% in July 2024, below the Reserve Bank of India’s (RBI) target of 4.0%, signaling price stability. The RBI has held the repo rate steady at 6.5%, balancing inflation control with economic growth. Food price volatility remains a challenge due to weather-related disruptions, but inflation is nonetheless expected to average 4.5% in FY2024-25.
Trade and Investment Trending Upward: India’s total merchandise and services trade reached USD 261.47 billion in Q1 FY2024-25, but a widening trade deficit of USD 31.17 billion signals the need for strategic export policies. Foreign direct investment remained resilient, with total inflows of USD 22.49 billion during Q1 FY2024-25, supported by strong investments in renewable energy and infrastructure.
Services and Agriculture Sectors Especially Strong: The services sector continues to drive India’s economic performance, contributing 54.7% to gross value added, while manufacturing and construction showed steady growth. Agriculture benefited from favorable monsoon conditions, contributing to rural demand and economic expansion.
Positive Economic Outlook: India’s economic outlook for FY2024-25 remains positive, with projections indicating stable inflation and strong GDP growth supported by government measures. Global factors, such as the potential recovery of Western economies and monetary policy easing, could further enhance capital inflows and export performance.
Opportunities and Challenges for US and Foreign Firms: Robust growth and stable prices create a favorable macroeconomic environment for business. Key sectors such as services, manufacturing, and renewable energy offer particularly attractive opportunities for US firms. However, geopolitical risks and elections in the United States and India could introduce uncertainties.
In Focus – Union Budget 2024-25: The Union Budget presented on July 23, 2024, emphasizes fiscal consolidation and investment, with a projected fiscal deficit of 4.9% and a record allocation of INR 11.11 lakh crore (approx. USD 132.26 billion) for capital expenditure, equivalent to 3.4% of GDP. Social expenditures target nine strategic priorities, including agriculture, employment, infrastructure, and energy security.