With global economic growth projected at 3.2% in 2025, lower than pre-pandemic levels, India must address local and global challenges to sustain its growth momentum. Policymakers can reverse recent slowdowns and implement structural reforms to achieve a potential growth rate of 7%.

BulletsIn

• Global fiscal volatility and US trade policies may increase capital outflows from emerging markets.
• Indian policymakers urged to allow greater rupee volatility to address currency risks.
• Reversing unintended fiscal tightening in H1 FY2025 could provide a growth boost.
• Slow credit growth driven by high loan-deposit ratios and tight liquidity; RBI easing liquidity to improve the situation.
• CRR cut in December 2024 expected to support credit growth; additional measures needed.
• Growth supported by rising real-estate activity, affordable housing prices, and low inventories.
• Investments in emerging sectors like data centers, energy storage, and defense manufacturing to sustain momentum.
• Policymakers should leverage the ‘China + 1’ strategy for global manufacturing opportunities.
• Improving urban infrastructure critical to sustaining real-estate and economic cycles.
• Addressing income inequality, ensuring education, and focusing on India as a ‘product nation’ vital for long-term growth.