New Delhi- India's ambitious economic growth target for fiscal year 2025 faces headwinds as recent indicators point to moderating momentum and inflation concerns, according to a new EY analysis.

While the RBI maintains its optimistic 7.2% GDP growth forecast for FY25, recent data presents challenges. September's CPI inflation hit 5.5%, pushing Q2 FY24 average to 4.2% - exceeding RBI's 4.1% target. This has prompted the central bank to hold rates steady at 6.5% despite global peers beginning to ease.

Government investment, a key growth driver, has contracted 19.5%. This decline comes as manufacturing PMI eased to 56.5 and services PMI dropped below 60 for the first time this year. Industrial production also registered its first contraction since late 2022.

The IMF projects India's growth to moderate from 8.2% in FY24 to 7% in FY25, citing waning post-pandemic demand. While personal income tax collections remain robust at 25.5% growth, corporate tax revenues have declined 6%, complicating fiscal targets.

Analysts emphasize that maintaining growth momentum will require accelerated government spending while carefully managing inflation pressures.