Strong fundamentals support 7% GDP growth this fiscal: FinMin

New Delhi: India is set to achieve 6.5-7 per cent GDP growth in the current financial year as indicated by the movements in high-frequency indicators till August, a Finance Ministry report said on Thursday.

The recent developments analysed indicate strong foundations of macroeconomic stability in India with steady growth, investment, employment and inflation trends, a strong and stable financial sector and a resilient external account, including a comfortable foreign exchange reserve position.

“A challenge on the macroeconomic front is of navigating the continuing uncertainty in global economic prospects. We will likely encounter a cycle of policy rate cuts globally amid fears of a recession in advanced economies and continuing geopolitical conflicts,” the Monthly Economic Review for August said.

On balance, the report said, the GDP growth of 6.7 per cent in Q1 FY25 and the movements in high-frequency indicators till August fit well with the real GDP growth projection of 6.5–7 per cent for FY25, provided by the Economic Survey 2023-24. For the remaining part of the financial year, it said, a reasonable expectation is that public expenditure will pick up, providing added growth and investment impetus. In the farm sector, higher Kharif acreage is already visible.

Adequately replenished reservoir levels will potentially give a fillip to the upcoming Rabi crops as well. The skewed spatial distribution of rain may have an impact on farm output in a few regions. However, in the absence of any serious adverse climate shocks, rural incomes and demand should get stronger, and food inflation will be milder, it said.