Saurabh Shukla
New Delhi: The past financial year has been quite eventful on the economic front. The financial year 2024-25 will end on 31 March, but this entire business year will be remembered for the significant decisions and fluctuations in the economy. This year, after Narendra Modi was re-elected as Prime Minister, the country first saw the budget in July 2024 and then again in February 2025. Meanwhile, Donald Trump made his return to the United States amidst tensions between Israel and Palestine, as well as the ongoing Ukraine-Russia war. The tariffs imposed by him on various countries have started to disrupt economic equations worldwide.
In India, not only has the Sensex seen a substantial decline from its peak after the pandemic, but it has also experienced one of the longest-lasting declines in the last three decades. Besides this there have been fluctuations in the GDP growth as well. This year those who invested in gold had a profitable time, while investors in mutual funds and the stock market had to endure market ups and downs. Inflation also remained high. In a significant move, the Reserve Bank of India (RBI) reduced interest rates this year after many years.
As per report of care rating India has witnessed net FPI outflows amounting to USD 22 billion since October 24 on account of global economic uncertainty and risk-off sentiment. It also suggests that the foreign exchange reserves currently stand at USD 654 billion, lower by USD 50 billion compared to September 2024. However, the forex reserves remain comfortable with an import cover of ~9 months.
GDP growth for the third quarter stood at 6.2%, reflecting a significant improvement compared to the 5.6% growth recorded in Q2 FY25. The growth for the second quarter was also revised upwards by 20 bps in the second advance estimate. The rebound in growth momentum in Q3 was largely anticipated, as indicated by several high frequency macroeconomic indicators, including improved GST collections, public spending, electricity generation, and export performance.
According to the report, for the full-year FY25, the second advance estimate puts the GDP growth at 6.5%, marginally higher than the 6.4% growth estimated earlier. Additionally, growth estimates for the previous two fiscal years, FY24 and FY23, have been revised upward by 100 bps and 60 bps, respectively. The healthy 6.5% growth for FY25, following the upwardly revised growth of 9.2% in FY24, is positive. However, 6.5% growth for FY25 looks
ambitious, as that would imply a growth of 7.6% in Q4 FY25.
Kumbh to boost economy further
Experts at care rating believe that the growth momentum will rebound further in the coming quarters. Factors such as recovering rural demand, lower tax burden, policy rate cuts, falling food inflation, and recovery in public capital expenditure should support improvement in economic activity. Private consumption demand has shown improvement led by rural demand. Festivities amidst ‘Maha-Kumbh’ celebrations in Q4 should also support consumption demand and sectors such as trade, hotel and transport. Going ahead, we expect consumption demand to further strengthen as inflationary pressures ease and the benefits of lower tax burden take effect in the next financial year.
However, rising global policy uncertainty, especially on the trade front, geopolitical tensions, and weather events, remains a key monitorable. Risk from reciprocal tariffs from the US and global trade war could dampen business sentiments even though overall direct impact is likely to be limited. Overall, we expect GDP growth of around 7% in Q4 FY25 and 6.7% for FY26.
Inflation Impact
Data from Ministry of Statistics and Programme Implementation (MOSPI) shows that the CPI inflation recorded a more-than-expected moderation to 3.6% in February 2025, marking the lowest reading in the last seven months. In the past 11 months CPI Inflation ranges from 4.8 in April to 3.6 in February 2025. Experts believe that it should stay around the 4% levels for the next few months. RBI has reduced the repo rate by 25 basis points from 6.50% to 6.25% in its monetary policy review as announced on February 7, 2025. There is a large expectation from RBI for a 25-basis point policy rate cut in the upcoming April MPC meeting. In next financial year Care rating expect a 25-50 basis point reduction in the policy rate in FY26 contingent upon the evolving growth-inflation dynamics in the economy.
Gold Prices
This financial year, gold prices have surged to new highs, driven by global uncertainties. As of March 26, 2025, the gold price per 10 grams on MCS is ₹89,958, compared to ₹68,872 previously. Experts believe that due to geopolitical tensions and tariff issues initiated by the US, there will be continued uncertainty in the markets, which could cause gold to perform even better in the future.
Share Markets
Regarding the movement of the share market this financial year, in April 2024, the BSE Sensex closed at 74,482, with a high of 75,124 and a low of 71,816. It reached a record high of 85,978 on September 24. However, since then, the Sensex has experienced a major fall. In March 2025, it touched a low of 72,633.
Expert's View
Chartered Accountant and Economist Yogendra Kaooor summarized the financial year and told ETV Bharat that India's GDP grew by 6.2% in FY 2024-25, compared to 8.2% in FY 2023-24. During this period the size of the economy crossed the $4 trillion mark up from $3.6 trillion. He also mentioned that the concept of religious tourism, highlighted by the success of the Mahakumbh with record visitors this fiscal year, has opened the gateway for India to organize large-scale events that will contribute to the country’s economic growth.
According to Yogendra Kaooor, the urban-rural spending gap has reduced in FY 2024-25, indicating increased infrastructure spending, government expenditure, and private investment. This has driven consumption levels in rural areas and boosted savings and disposable income, which will accelerate India's economic development by reducing inequality. India continues to be the fastest-growing digitized nation in the world, with a consistent double-digit growth rate compared to the previous year. Direct tax collections, GST revenues, and export earnings have all shown a consistent increase in FY 2024-25 compared to FY 2023-24, he added.
On the negative side he pointed out that the double-digit GDP growth is missing due to the lack of growth in private investment. According to him, both the government and the private sector are not investing in research and development at the scale needed for double-digit GDP growth. He also emphasized that the skill development policy is not being implemented effectively in Tier 2 and Tier 3 cities. Moreover, manufacturing in the MSME sector is not growing at the required pace to absorb the young population, he added.
Next Financial Year Forecast
According to global rating agency S&P Global, Asia-Pacific economies will feel the strain of rising U.S. tariffs specifically and a pushback on globalization more generally. However, we see domestic demand momentum broadly holding up, especially in the region's emerging-market economies.
It says in its report that While we have revised many of our GDP projections downward, these revisions were mostly minor. Given the volume of policy measures and external pressures hitting Asia-Pacific, the robustness of our forecasts underscores the resilience of the regional economies.
It also noted that India's GDP will grow 6.5% in the fiscal year ending March 31, 2026. It says that the forecast is the same as the outcome for the previous fiscal year, but less than the earlier forecast of 6.7%. This assumes the upcoming monsoon season will be normal and that commodities--especially crude--prices will be soft. Cooling food inflation, the tax benefits announced in the country's budget for the fiscal year ending March 2026, and lower borrowing costs will support discretionary consumption.
S&P Pointed out that central banks have already cut policy rates this year in Australia, India, Indonesia, New Zealand, South Korea, Taiwan and Thailand. All cuts were by 25 bp, except in New Zealand, where it was by 50 bp. We expect rate cuts to continue across the board through this year.
The Reserve Bank of India will cut interest rates by another 75 bp-100 bp in the current cycle, we project. Easing food inflation and lower crude prices will move headline inflation closer to the central bank target of 4% in the fiscal year ending March 2026 and fiscal policy is contained. On the rupee front it expects currency to be below 90 per dollar.
