NEW DELHI, Dec 26 (Reuters): India's economy is expected to grow at around 6.5 per cent in fiscal year 2024/25, closer to the lower end of its 6.5 per cent-7 per cent projection, as global uncertainties pose a dampening threat, the government said on Thursday.
The growth outlook for October to December appears bright, with rural demand remaining resilient and urban demand picking up in the first two months of the quarter, according to the finance ministry's monthly economic report for November.
Growth slowed more than expected in July to September, hampered by weaker expansion in manufacturing and consumption. India has maintained that its economy will grow at a world-beating pace of 6.5 per cent-7 per cent despite a challenging environment.
The outlook is expected to be better in October-to-March than in the first six months of the financial year, it said.
"The combination of monetary policy stance and macroprudential measures by the central bank may have contributed to the demand slowdown," the report said.
India's central bank has kept interest rates unchanged for 11 straight policy meetings, despite calls for rate cuts to support growth amid high inflation.
For the next financial year starting April 1, 2026, the report said, newer risks have emerged, such as uncertain global trade growth and a stronger US dollar.
US President-elect Donald Trump has threatened many nations, including India, with higher tariffs on imports, raising risks of a global trade war after he takes office on Jan. 20. Trump's election victory has also fuelled a run-up in the dollar and US yields.
However, India's growth outlook in 2025/26 and coming years is bright in terms of domestic economic fundamentals, the finance ministry's report said.
Meanwhile, India is considering cutting income tax for individuals making up to 1.5 million rupees ($17,590) a year in February's budget to provide relief to the middle class and boost consumption as the economy slows, two government sources told Reuters.
The move could benefit tens of millions of taxpayers, especially city dwellers burdened by high living costs, if they opt for a 2020 tax system that strips exemptions like housing rentals.
Under that system, annual income of 300,000 rupees to 1.5 million rupees is taxed at between 5 per cent to 20 per cent. Higher income draws 30 per cent.
Indian taxpayers can choose between two tax systems - a legacy plan that allows exemptions on housing rentals and insurance, and a newer one introduced in 2020 that offers slightly lower rates, but does not allow major exemptions.
The sources, who did not want to be named because they were not authorised to talk to the media, said they had not decided on the size of any cuts. A decision would be taken closer to the budget on Feb.1, they said.
