India’s economy is forecasted to grow at 6.5% in the current and next financial years, despite slowing private consumption and investment, according to an EY report. Government capital expenditure needs urgent acceleration to meet growth targets.

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• Real GDP growth in July-September 2024 fell to 5.4%, lowest in 7 quarters, from 6.7% in the previous quarter.
• Slowing private consumption and gross fixed capital formation reduced growth by 1.5 percentage points.
• Government capital expenditure growth contracted sharply, remaining negative at (-) 14.7% in the first 7 months of FY25.
• To achieve budgeted capital expenditure growth of 17.1%, a 60.5% increase is needed in the last 5 months of FY25.
• Investment growth slowed, with gross fixed capital formation growth at 5.4% in Q2 FY25, lowest in 6 quarters.
• EY forecasts real GDP growth of 6.5% for FY25 and FY26, relying heavily on domestic demand and services exports.
• Recasting the 2019 National Infrastructure Pipeline with revised targets for priority sectors is recommended.
• Annual infrastructure capital expenditure allocation of 6% of GDP suggested for the next 5 years.
• Major fiscal reforms proposed, including eliminating revenue deficits and targeting fiscal deficits of 3% of GDP for central and state governments.