India Poised for Steady Economic Growth Despite Global Challenges: CareEdge Ratings

CareEdge Ratings has projected India’s GDP growth to remain robust at 6.5% for FY25 and 6.7% for FY26, even amidst global uncertainties. The projections were shared during a webinar on the Economic & Sector Outlook for 2025. Fiscal consolidation efforts are expected to continue, with a slight dip in nominal GDP growth at 9.9%, compared to the budgeted 10.5%. The fiscal deficit is estimated at 4.8% of GDP for FY25, slightly below the budgeted 4.9%.

Monetary Policy & Inflation
The Reserve Bank of India (RBI) is expected to implement rate cuts of 50-75 basis points in 2025, as food inflation moderates due to a strong kharif harvest and favorable rabi conditions. CPI inflation is forecasted at 4.8% in FY25, with core inflation expected to average 3.5%.

Sectoral Highlights

1. Infrastructure & Real Estate:

   • National Highway construction is likely to decline by 10% in FY25 due to heightened competition and execution challenges.
   • Residential demand is expected to remain resilient, with double-digit growth in sales and launches. However, rising land prices and construction costs may impact affordability.
   • Office leasing is projected to hold steady with healthy occupancy above 80%.

2. Aviation:

   • Passenger traffic is expected to grow at twice the GDP growth rate for FY25-FY26, supported by a capital expenditure thrust of ₹40,000 crore over the next three years.
   • Air cargo is projected to grow by 9-10% in FY25, despite challenges like the Red Sea crisis.

3. Banking & NBFCs:

   • Credit growth in banks is expected to moderate due to mergers and higher risk weights.
   • NBFCs may face elevated credit costs, especially in unsecured asset classes like Microfinance Institutions (MFIs), impacting profitability.

4. Steel & Renewable Energy:

   • Steel sector profitability has been under pressure due to rising imports and subdued exports, but demand recovery in H2FY25 could provide marginal relief.
   • Renewable energy, particularly wind and hybrid projects, is expected to see growth as demand for power during non-solar hours increases.

5. Pharma & Automobiles:

   • Pharma is set to grow at 9-10% annually, driven by specialty drugs and rising chronic diseases, with margins improving by 50-100 basis points.
   • The two-wheeler segment in the automobile industry is witnessing strong growth, while passenger vehicles face slower demand, especially for entry-level models.

6. Hospitality & Data Centers:

   • Revenue per available room (RevPAR) for branded hotels is projected to rise by 8-9% in FY25.
   • The data center industry is poised for robust growth, with capacity expected to double by 2027 and revenues growing at a CAGR of 30% for FY25-27.

External Trade & Currency Outlook
Merchandise exports are projected to rise by 2.5%, while services exports could grow by 13% in FY25. The current account deficit (CAD) is expected to remain manageable at 0.9% of GDP. The rupee is likely to trade around 84 by the end of FY25 and between 84-86 by FY26, supported by high forex reserves.

CareEdge Leadership Insights
Sachin Gupta, Chief Rating Officer, emphasized cautious optimism in India’s corporate sector, highlighting the need for improvement in private investments. Rajani Sinha, Chief Economist, noted that the second half of FY25 could see a rebound in consumption and government capital expenditure.

CareEdge Ratings remains optimistic about India’s economic resilience, citing steady growth across key sectors despite global uncertainties and domestic challenges. The outlook suggests a cautious yet positive trajectory for India’s economy in the coming years.