Indian Economy to Grow at 6.5 % in the Fiscal Year

The Indian economy is projected to grow at 6.5% in the fiscal year beginning April 1, according to the EY Economy Watch. This growth forecast emphasizes the importance of a well-structured fiscal strategy that prioritizes human capital development while ensuring fiscal prudence, which could significantly bolster long-term growth prospects. The March edition of EY Economy Watch estimates India's real GDP growth at 6.4% for FY25 (April 2024 to March 2025), highlighting the need for a realignment of fiscal policy to support the nation’s goal of achieving Viksit Bharat.

Revised national accounts data from the National Statistical Office (NSO) indicates that real GDP growth rates for FY23 to FY25 are estimated at 7.6%, 9.2%, and 6.5%, respectively. For FY25, the third quarter growth is projected at 6.2%, necessitating a robust 7.6% growth in the fourth quarter to meet the annual GDP target. Achieving this would require a significant 9.9% increase in private final consumption expenditure, a level not seen in recent years. Alternatively, boosting investment expenditure, particularly through government capital expenditure, could play a crucial role.

The report also notes that the fiscal deficit may be influenced by any supplementary demand for grants, but a higher nominal GDP could help absorb these increases. With a growing population and changing economic landscape, investments in education and healthcare are vital for sustaining long-term growth and enhancing human capital. Over the next two decades, it is suggested that India should increase its education spending to 6.5% of GDP by FY2048 from the current 4.6%, and health expenditure to 3.8% from 1.1% in 2021, to improve access and outcomes in these critical sectors.