New Delhi, Jan 9: The Indian economy is projected to grow at a robust 6.8 per cent in the financial year 2025-26, driven by strong high-frequency indicators, according to a Bank of Baroda forecast.

The report expects nominal GDP growth to be around 10.5 per cent during the next financial year. It highlights that key indicators of this growth include robust air passenger traffic, a rise in services PMI, and increased GST collections. Additionally, higher rabi crop sowing is expected to boost agricultural growth, providing a stable foundation for the economy.

The report highlighted that the Indian economy has shown resilience, driven by strong festive demand and steady improvement in economic activity. This resilience is reflected in high-frequency indicators that have shown a significant uptick in the third quarter of FY25.

The report states that while there has been a slowdown in 2024-25, on the bright side both private and government consumption is expected to register a strong growth of 7.3 per cent (4 per cent in FY24) and 4.1 per cent (2.5 per cent in FY24) respectively in FY25. Furthermore, in a positive surprise, the export growth is likely to register a strong growth of 5.9 per cent against a growth of 2.6 per cent in FY24.

It also highlights that government expenditure is expected to pick momentum in the second half of 2024-25 which will emerge as a driver of growth. Besides, the report is bullish about the higher growth in the agricultural sector.

However, the report cautions about downside risks due to global headwinds. Among these, the threat of a tariff war looms large as the incoming US administration under President Trump may impose protectionist trade policies. Such measures could disrupt global trade and potentially trigger retaliatory actions, posing risks to global economic stability.

It said, "A range of economic and strategic risk prevails post the imposition of the tariff policies by the incoming US President Mr Trump. This could be a far-reaching impact on global trade".

Domestically, the focus will shift to key economic events, including the Union Budget, corporate performance in the third and fourth quarters, and the Reserve Bank of India's monetary policy decisions, the report added.

--IANS

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