Current Affairs - Economy

Morgan Stanley has adjusted its forecast for India’s GDP growth for FY25 to 6.3%, down from an earlier projection of 6.7%. This revision follows a slowdown in Q2 FY25, where growth fell to 5.4%, the lowest since March 2023, due to weak private consumption and industrial performance. Despite these challenges, the services sector showed resilience, growing by 7.1%. The recovery in the second half of FY25 is expected to be supported by government spending, rural demand improvement, and easing financial conditions. This aligns with Morgan Stanley’s expectation of an average 6.6% growth during the latter half of FY25.

In October 2024, UPI achieved a record high with 16.58 billion transactions worth ₹23.49 lakh crore, reflecting a 45% year-on-year growth. This significant increase underscores UPI's role in driving the shift toward a cashless economy by offering secure, fast, and seamless payment solutions. Operational in 7 countries, UPI, launched by NPCI in 2016, continues to enhance global digital payment adoption.

India’s Core Sector growth rebounded to 3.1% in October 2024, reflecting recovery momentum after a low of 0.1% in August. The eight core industries, contributing 40% of the industrial output, play a significant role in assessing the economic health. This improvement signals gradual stabilization, although growth remains lower compared to the robust performance in the previous fiscal year.

In Q2 FY 2024-25, India’s GDP growth rate slowed to 5.4%, marking the slowest growth in seven quarters. This represents a decrease from 6.7% in the previous quarter (Q1 FY 2024-25) and an 8.1% growth in the same period last year (Q2 FY 2023-24). The decline reflects a broad slowdown across various sectors, including manufacturing, mining, and utilities, despite improvements in services such as public administration and trade. The slowdown is a significant indicator of the challenges faced by the Indian economy in this period.

S&P Global retained India's GDP growth forecast for 2024-25 at 6.8%. Despite revisions for subsequent years, this figure reflects confidence in India's economic stability for the stated period. Factors influencing the forecast include high interest rates and a reduction in fiscal impetus, which may dampen urban demand. However, the retained growth rate suggests resilience in other sectors offsetting these challenges.