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India Ratings & Research (Ind-Ra) has upped India's Gross domestic product (GDP) growth forecast for the current fiscal (FY25) to 7.5 per cent from 7.1 per cent projected earlier on expectation of improved consumption demand. It said the ongoing growth momentum led by government capex, deleveraged balance sheets of corporates/banks, and incipient private corporate capex cycle has now found support from the union government budget.

The rating agency said the budget promises to bolster agricultural/rural spending, improve credit delivery to MSMEs and incentivise employment creation in the economy. It believes these measures would help in broad basing the consumption demand. Ind-Ra's growth projection is higher than that of RBI which projected FY25 growth at 7.2 per cent and Finance Ministry's Economic Survey which estimated GDP expansion between 6.5-7 per cent. It expects Private Final Consumption Expenditure (PFCE) to grow to a 3-year high of 7.4 per cent in FY25, from 4 per cent in FY24. 

Ind-Ra stated that the consumption demand is highly skewed, as it is driven by the goods and services largely consumed by households belonging to the upper-income bracket. However, an above-normal monsoon coupled with the measures announced in the union budget FY25 is expected to correct it, by boosting the demand of goods and services consumed by the rural and households belonging to the lower income bracket. Although food inflation continues to be a risk, the expectation of retail inflation in FY25 averaging lower than in FY24 will support the real wage growth.