MUMBAI, India, Jan. 24, 2025 /PRNewswire/ — Dun & Bradstreet, a global leader in business decisioning data and analytics, has released its Economy Observer report for January 2025. Economy Observer is a monthly report sharing in-depth analysis of key macroeconomic developments in India and provides forecasts for key economic indicators, and insight into the expected direction of the Indian economy.
Key economic forecast:
Real Economy: India’s economy appears to be in a cyclical downturn, with activity slowing in the first half of FY2024-25. This deceleration has been driven by macroprudential tightening in lending, reduced public expenditure in an election year, and a cyclical slowdown in private consumption and investment, as reflected in high-frequency indicators. The National Statistical Office projects real GDP growth at 6.4% for the fiscal year 2024-25, weighed down by slower mining and manufacturing activities. Dun & Bradstreet expects IIP growth to moderate to 4.0% in December 2024, reflecting both global uncertainties and domestic pressures, with industrial production momentum cooling as the base effect normalizes. The February budget will play a crucial role in addressing subdued public spending and stimulating growth. To boost consumption, especially in rural and urban areas, we anticipate enhanced allocations for programs like MGNREGA, PM KISAN, and PMAY, along with potential tax incentives to promote rural and urban spending. At the same time, we expect driving investment growth to remain a key focus, with an expected Rs 1-1.5 lakh crore increase in capital expenditure over FY25’s revised estimates. The government’s borrowing program is likely to rise only marginally to around Rs 15 lakh crore, which should keep bond yields stable. Meanwhile, the fiscal deficit is expected to undershoot the 4.9% target for FY25 by ~10 bps, with a further reduction to 4.3-4.4% targeted for FY26BE. Overall, while the first half of the fiscal year has been challenging, the second half is expected to see gradual improvement, supported by government measures to drive consumption and investment amid a slowing global growth environment.
Price Scenario: India’s price scenario in December 2024 showed mixed trends, with WPI inflation rising to 2.4% y/y from 1.9% in November, driven by higher input costs and global commodity pressures. Dun & Bradstreet projects WPI inflation to reach 3.0% in January 2025, reflecting persistent inflationary pressures. CPI inflation eased slightly to 5.2% in December 2024 from 5.5% in November 2024, but rural inflation remained elevated at 5.8% compared to 4.6% in urban areas in December 2024, driven by higher costs for essential goods. Food inflation, at 8.39% y/y, continued to be a concern, particularly in rural areas. Dun & Bradstreet expects CPI inflation to rise to 5.8% y/y in January, driven by food and fuel cost pressures, increased rural demand, and global uncertainties.
Money & Finance: The 91-day Treasury Bill yield remained stable at 6.6% in December 2024, up from 6.5% in November. Dun & Bradstreet forecasts the rate to remain at 6.6% in January 2025, reflecting expectations of continued cautious monetary policy. Similarly, the 10-year G-Sec yield increased to 6.9% in December 2024, from 6.8% in November 2024. Dun & Bradstreet expects 10-year G-sec to stay at 6.9% in January 2025 due to ongoing inflation concerns and fiscal challenges. Bank credit growth moderated to 11.2% in December, down from 12.1% in November, as high-interest rates and economic uncertainty curbed lending activity. Dun & Bradstreet expects bank credit growth to stabilize at 11.5% in January 2025, reflecting cautious optimism and a focus on managing credit risk. Deposit growth also moderated to 9.8% in December, likely influenced by shifting consumer spending and saving patterns amid a tighter monetary environment.
External Sector: India’s external sector is facing significant pressure, with the Indian Rupee (INR) depreciating sharply amid a slowdown in foreign portfolio investor (FPI) activity. In December 2024, the INR/USD exchange rate stood at 85.0, and it is expected to weaken further to 86.3 by January 2025. Dun & Bradstreet is forecasting further depreciation, with the exchange rate potentially reaching 86.7 in February 2025, driven by a stronger US dollar, global economic uncertainties, higher oil prices, and capital outflows.
Dr. Arun Singh, Global Chief Economist, Dun & Bradstreet said, “India’s economy is likely in a cyclical downturn, but the outlook for the second half of FY2024-25 is brighter, supported by government measures to boost investment and consumption. With a projected Rs 1-1.5 lakh crore increase in capital expenditure and enhanced allocations for rural programs, growth momentum is expected to strengthen. Stable bond yields, an improving fiscal deficit, and targeted public spending position India to weather global challenges and sustain economic resilience.”
D&B’s Economy Observer Forecast | |||
Variables | Forecast | Latest Period | Previous period |
IIP Growth | 4.0% Dec-24 | 5.2% Nov-24 | 3.5% Oct-24 |
Inflation WPI | 3.0% Jan-25 | 2.4% Dec-24 | 1.9% Nov-24 |
CPI (Combined) | 5.8% Jan-25 | 5.2% Dec-24 | 5.5% Nov-24 |
Exchange Rate (INR/USD) ** | 86.7 Feb-25 | 86.3 Jan-25 | 85.0 Dec-24 |
91-day T-Bills* | 6.6% Jan-25 | 6.6% Dec-24 | 6.5% Nov-24 |
10-year G-Sec Yield* | 6.9% Jan-25 | 6.9% Dec-24 | 6.8% Nov-24 |
Bank Credit | 11.5% Jan-25 | 11.2% Dec-24 | 12.1% Nov-24 |
*Weekly Average ** Dun and Bradstreet Forecasts | |||
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