New Delhi. CARE Ratings has lowered India's GDP growth forecast for FY25 to 6.5% due to a decline in corporate profitability, a reduction in public capital expenditure and sluggishness in urban consumption. Earlier, CARE Ratings had projected GDP growth at 6.8%. In a virtual webinar, CARE Ratings said that this revision reflects slow GDP growth in the second quarter, a deep decline in corporate profitability, a reduction in public capital expenditure in the first half and a slowdown in urban consumption.

CARE Ratings says that this slowdown is temporary and GDP growth is likely to pick up in the second half of the financial year. Increase in government capital expenditure and improvement in agricultural production will strengthen rural consumption. This can lead to GDP growth reaching 6.7% in FY 2026.

Private investment will improve.
Sachin Gupta, Chief Rating Officer, CARE Ratings, said, "India's corporate sector has shown cautious optimism in the first half of FY25. However, private investment is expected to improve in 2025, driven by easing monetary policy." CARE Ratings said that food inflation will come down in FY 2025 due to strong Kharif crop and favorable Rabi sowing. Inflation is expected to be 4.8%. Along with this, a cut of 50-75 basis points in the repo rate has been predicted in 2025.

On government finances, the agency said weak corporate tax collections will be balanced by income tax collections. However, the Centre's capital expenditure may fall short of the target by ₹1.5 lakh crore, and the fiscal deficit is estimated at 4.8% of GDP. GDP growth in Q2FY25 was 5.4%, a seven-quarter low, compared to 6.7% in the previous quarter. Experts believe the situation will improve in the second half due to increased government expenditure and improvement in the agricultural sector.

ADB also reduced forecast
Asian Development Bank (ADB) also reduced India's GDP growth forecast for the current financial year from 7% to 6.5%. ADB has attributed this to weakness in industrial production, decline in unsecured personal loans and high food prices.