Recovery in domestic demand, healthy rabi output & easing inflation to boost consumption further: Crisil

New Delhi [India], April 14 (ANI): India's domestic demand is showing signs of recovery, supported by several positive developments, according to a recent report by Crisil.
The report highlighted that healthy rabi output and easing inflation in the fourth quarter of fiscal 2025 are likely to boost consumption demand further.
It said "improved growth in capital, infrastructure and construction goods' output in the second half points at a gradual pick-up in construction /capital expenditure activity in the latter part of the fiscal. Finally, other high-frequency indicators show growth prospects improving in the fourth quarter".
One of the key contributors to the improving demand is the better performance of the Index of Industrial Production (IIP) for manufacturing.
The report noted that IIP manufacturing showed stronger growth in the second half of the fiscal year. This improvement helped lift production in sectors such as petroleum products, machinery, and textiles.
Additionally, the output of capital goods, infrastructure goods, and construction goods also increased in the second half. According to the report, this indicates a gradual pick-up in construction activities and capital expenditure by businesses, which are crucial for long-term economic growth.
It also noted "All these factors corroborate recovery in domestic demand. Healthy rabi output and easing inflation in the fourth quarter also bode well for consumption demand".
High-frequency indicators are also showing positive signs, especially in the fourth quarter. These indicators suggest that the economy is gradually gaining momentum and that the outlook for demand is improving.
The report also pointed to findings from the Reserve Bank of India's latest surveys. The RBI's Quarterly Industrial Outlook survey shows a sequential strengthening of demand in the fourth quarter.
Meanwhile, the Consumer Confidence Survey conducted in March suggestsedimprovement in sentiment among consumers in both rural and urban areas.
Putting together all these indicators, the report said that the domestic demand is on the path of recovery. The combination of strong rabi crop output and falling inflation is expected to support consumer spending going forward.
However, the report also highlighted risks to India's growth outlook. One major concern is the increase in tariffs by the United States.
The report warned that slower global growth and possible reciprocal tariffs on Indian goods, expected in the next three months, could impact exports. Moreover, the uncertainty around the duration and frequent changes in tariffs could discourage investments.
Overall, while the domestic side of the economy is improving, external risks remain a challenge. (ANI)