SYNOPSIS
The Bank of Baroda forecasts robust economic growth for India in the upcoming financial year (FY26), projecting a 6.8% real GDP growth and 10.5% nominal GDP growth. This positive outlook is supported by strong economic indicators, robust domestic demand, and a promising agricultural outlook. While global headwinds pose challenges, the report emphasizes the importance of sustained investment and consumption for maintaining this growth momentum.
The Bank of Baroda predicts strong economic growth for India in the forthcoming financial year (FY26), estimating a 6.8% increase in real GDP and a 10.5% rise in nominal GDP. Solid fundamentals, including increased air passenger traffic, a rise in services PMI, higher GST collections, and a favorable rabi crop sowing season back this encouraging forecast.
The Indian economy has shown resilience, fueled by strong demand during festivals and a consistent improvement in economic activity, as evidenced by high-frequency indicators. Continued investment and consumption will be essential for sustaining this growth momentum.
Nevertheless, global challenges, particularly the threat of a potential tariff war stemming from protectionist trade policies, present considerable downside risks. The forthcoming Union Budget, corporate performance, and the Reserve Bank of India's monetary policy choices will also influence the economic landscape.
In spite of these obstacles, the report anticipates a reduction in rates by the RBI in February 2025, which is expected to further bolster economic growth. The report concludes that while uncertainties at the global level remain, the Indian economy is set to keep moving on a steady growth trajectory, supported by strong domestic demand and enhancing economic indicators.
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