CII Projects 8% Economic Expansion For FY25, Surpasses RBI Forecast Of 7.2% Growth; What Sanjiv Puri Said?

The Confederation of Indian Industry (CII) anticipates India's economy to expand by 8% in the fiscal year 2025, marking the fourth consecutive year of growth above 7%. This optimistic forecast, shared by Sanjiv Puri, the newly elected president of CII and the chairman and managing director of ITC Ltd, surpasses the Reserve Bank of India's (RBI) growth forecast of 7.2% for the current fiscal.

During a media briefing on Thursday, Puri highlighted emerging signs of a recovery in rural consumption. This outlook aligns with RBI Governor Shaktikanta Das's recent statements, which were buoyed by expectations of a robust monsoon and improved kharif crop production. These factors are anticipated to spur farm sector activity and rural spending.

"The growth estimate hinges critically on addressing the unfinished reform agenda on priority, in addition to improvement in world trade prospects aiding our exports, twin engines of investment and consumption doing well, and expectations of a normal monsoon, among other factors," Puri noted in a CII statement.

The CII's forecast provides a detailed breakdown of expected sectoral performance. Farm sector output is projected to grow by 3.7% in FY25, significantly up from 1.4% in FY24, partly due to a favourable base effect. Industrial growth is anticipated at 8.4%, slightly down from 9.3% in the previous year but still robust. The services sector is expected to maintain strong momentum, with growth accelerating to 9% from 7.9% in the year ending March.

Despite these variations, Puri emphasized the strength of the industry and services forecasts, underscoring their robust nature.

CII attributes the expected stellar performance to five key growth drivers, which have collectively pivoted the Indian economy into an accelerator mode:

Private Sector Investment: Increasing participation in the growth narrative.
Public Investment: Significant spending on physical and digital infrastructure.
Well-Capitalized Banking System: A solid foundation for financial stability.
Booming Capital Market: Reflecting investor confidence and economic vitality.
Reduced Oil Dependence: Enhancing economic resilience against global oil price volatility.

A business confidence survey conducted by CII in January-March 2024 revealed that three-fourths of over 200 respondents expect an uptick in private capital expenditure in the first half of the current fiscal compared to the same period the previous year. Puri, during his presentation, highlighted that gross fixed capital formation by the private sector stood at 23.8% of nominal GDP in FY23, higher than the levels observed in the pre-pandemic years of FY19 and FY20.

Key infrastructure-linked sectors such as cement and steel, alongside industries like electronics, food processing, and telecom, are seeing increased private investment levels. These sectors are benefiting from the government's production-linked incentive schemes, which have spurred growth in logistics, renewable energy, automobiles, and semiconductors.

Despite the positive outlook, Puri acknowledged several potential headwinds:

Continued global economic unpredictability and the persistence of higher-for-longer interest rates could result in volatile capital flows. Heatwaves and extreme weather events pose risks to agricultural output and overall economic stability. Elevated global commodity prices could also impact growth adversely.

To sustain and enhance the investment climate, Puri advocated for continued tax reforms. He proposed that the government consider a roadmap for simplifying capital gains tax and tax deducted at source provisions, which would boost the overall competitiveness of the economy.

The CII's optimistic growth projection for FY25 reflects the resilience and dynamism of the Indian economy. With strategic investments, supportive government policies, and a focus on key growth sectors, India appears poised to continue its robust economic trajectory. However, navigating global uncertainties and climate challenges will be crucial to sustaining this growth momentum.