For the last few years, the wheels of India’s economy have been turning rapidly. The country’s GDP growth every year is not only above 7 percent, but is also better than all the countries in the world. Even after that, many things are coming to light regarding India’s growth in the current financial year. From IMF to World Bank and all the rating agencies are predicting the country’s growth outlook to be 7 percent or above, but will this really happen? Doubts are being seen on this matter also.
The main reason for which is said to be the inflation figures in the country and decreasing government expenditure. In the report of Ernst & Young i.e. EY, one of the biggest companies of Britain, it has been said that if India wants its growth to be 7 percent or above in the current financial year, then it will depend on two things: first, government investment remains strong and second, inflation. But stay under control. Let us also tell you what kind of things have been said in the report of Ernst & Young?
What does EY report say?
According to the report of Ernst & Young (EY), to keep India’s GDP growth above 7 percent in the financial year 2025, there will be a need to keep government investment and inflation under control. According to EY, in the recent reports that have come out, the outlook regarding India’s growth is quite mixed. On the other hand, amidst rising inflation, the Reserve Bank of India (RBI) has maintained a cautious stance on monetary policy.
Inflation is continuously increasing
In September 2024, CPI inflation was seen at 5.5 per cent, taking the average inflation for Q2FY24 to 4.2 per cent, which is slightly higher than the RBI’s expected target of 4.1 per cent. Estimates for the third quarter suggest that CPI inflation could rise to 4.8 per cent, potentially delaying an interest rate cut by the RBI, especially when inflation is above the average target.
During its October monetary policy review, the RBI kept its repo rate frozen for the 10th consecutive time. Whereas in the month of September, the US Fed had cut interest rates by 50 basis points. Despite this, the RBI remains optimistic about India’s real GDP growth for FY2025, projecting a rate of 7.2 per cent on the back of projected strong personal consumption and investment growth.
decline in revenue
According to the report, the biggest thing is that in recent times there has been a significant decrease in government investment. Which is close to 19.5 percent. This government expenditure is considered very important in furthering the growth of the country. On the other hand, there is an increase in personal income tax revenue for the remaining days of the current financial year, whose growth is 25.5 percent. At the same time, there has been a decline of 6 percent in corporate tax revenue. Which is a big challenge before the government. Due to which the government is facing a huge decline in capital expenditure.
Economic data is not good
The economic figures that have come out in recent times are indicating a slowdown in growth. The manufacturing PMI fell to 56.5 in September, while the services PMI fell below 60 for the first time since January 2024, indicating a slowdown in production and new orders. Moreover, the Index of Industrial Production (IIP) has declined for the first time since October 2022, reflecting macroeconomic challenges. The International Monetary Fund (IMF) has recently estimated India’s growth at 7 percent, which is less than 8.2 percent in the last financial year. The growth estimate for financial year 2026 is 6.5 percent. Suppressed demand has been held responsible for this recession.
