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India's domestic demand is expected to remain resilient, supported by the personal income tax concessions announced in the 2025 Union budget and the repo rate cut initiated by the Reserve Bank of India, S&P Global Market Intelligence said in a note.
The RBI had reduced the repo rate by 25 basis points in the February monetary policy meeting. In the Union Budget for 2025-26 tabled on February 1, the finance minister had announced that no income tax will be payable on income up to Rs 12 lakh, providing significant relief to taxpayers, especially the middle class. Earlier, this limit was Rs 7 lakh. The government expects that taxpayers saving money through lesser income tax will plough it back in the economy in the form of either consumption, savings or investments. Additional liquidity-boosting measures by the RBI will also help the domestic economy, financial information and analytics firms said in the note. "We therefore project real GDP growth to be sustained at 6.4 per cent in fiscal year 2025-26," it said. "Rising tariff threats and slowing global demand risk to turn exports into a drag on growth in the upcoming fiscal year 2025-26, but modest fiscal stimulus announced in February and RBI's monetary policy easing should support domestic demand, sustaining growth at 6.4 per cent," it explained. In 2025-26, the Indian economy is projected to grow between 6.3 per cent and 6.8 per cent, as noted in the Economic Survey presented on January 31. December quarter GDP results were in line with S&P Global Market Intelligence estimates. The Indian economy grew by 6.2 per cent in real terms in the October-December quarter of the current financial year 2024-25. The October-December growth was higher than the July-September quarter. In July-September, the GDP grew by 5.6 per cent. However, the October-December quarterly growth was lower than RBI's forecast of 6.8 per cent. Improving rural demand and increased government spending - the key factors supporting the economy during the December 2024 quarter - may keep the momentum sustained during the final quarter (January-March) of financial year 2024-25, resulting in the full year 2024-25 growth of 6.4 per cent, according to S&P Global Market Intelligence estimates. Going ahead, according to S&P Global Market Intelligence, favourable inflation outlook should allow the RBI to cut interest rates at least once more in April, although further easing may be constrained by the weakening rupee. The economy, however, faces growing headwinds amid US tariff threats. (ANI)
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