New Delhi, Feb 2 (IANS): The government consumption growth is estimated to improve in FY25 given the increase in the revenue expenditures of both state and union governments, while private consumption growth is expected to be driven by rural demand, easing inflation and a favourable base, according to a report on Sunday.

Exports are also expected to witness strong growth supported by robust growth in services exports, said PwC’s ‘Budget 2025–26: Fostering India’s Inclusive Growth’ report, which offers detailed insights into the budget highlights, economic outlook and key tax and regulatory proposals that will shape India’s economic trajectory in the coming years.

As per the first advance estimates, India’s economic growth is expected to moderate to 6.4 per cent in financial year (FY) 2025, compared to 8.2 per cent growth in FY24, mainly due to slowdown in urban consumption, high food inflation, slow growth in capital formation and global headwinds.

However, India is expected to remain the world’s fastest growing in 2025, supported by a strong domestic market, rising working age population and strong macroeconomic fundamentals, said the report.

The government estimates that it will better its fiscal deficit target of 4.9 per cent and pegs it at 4.8 per cent for financial year (FY) 2025.

It has also budgeted a fiscal deficit of 4.4 per cent for FY26, thereby keeping its commitment to attain a lower than 4.5 per cent deficit by FY26.

The economic survey projects growth in the range of 6.3 per cent to 6.8 per cent in FY26.

“Inflation is expected to moderate to an average of 4.5 per cent in FY26, aided by a favourable food inflation with good harvest and normal monsoon expected and softening commodity prices,” said the report.

The exchange rate, which has been under pressure, should improve, as the volatility in Foreign Portfolio Investor (FPI) flows subsides and crude price softening begins to lower the prices of the Indian crude import basket, it added.