India’s GDP is projected to range between 6.5 per cent and 6.8 per cent for 2024–2025, according to Deloitte India’s latest Economic Outlook. The report further forecasts growth of 6.7 per cent to 7.3 per cent for the subsequent year.
The multinational entity also highlighted the need for cautious optimism amid lingering uncertainties in the global trade and investment sector.
Keeping the global economic challenges, the Reserve Bank of India (RBI) also lowered its annual growth forecast to 6.6 per cent, while the National Statistical Office (NSO) estimates GDP growth at 6.4 per cent for the current fiscal year.
India’s GDP expanded by 5.4 per cent year-on-year in the second quarter of 2024-25, falling below market expectations. This marked the second consecutive quarter of slower-than-expected growth, with the April-June quarter also underperforming the RBI’s 7 per cent forecast.
Rumki Majumdar, an economist at Deloitte India, “Election uncertainties in the first quarter followed by a modest activity in construction and manufacturing in the subsequent quarter due to weather-related disruptions led to weaker-than-expected gross fixed capital formation. The government’s capex stood at just 37.3 percent of annual targets in the first half, a sharp decline from last year’s 49 percent, and there is a lag in the momentum it needs to gain.”
He further attributed the challenges to a tempered global growth outlook, potential changes in trade regulations among industrial nations, and stricter-than-expected monetary policies in India and the US.
These factors, he noted, could disrupt the synchronised recovery in Western economies that was initially projected for this fiscal year.
Despite these hurdles, Deloitte highlighted several bright spots suggesting that India should adapt to the evolving global landscape and use its domestic strengths to go for a sustainable growth.
For instance, rural consumption remains strong, supported by strong agricultural output and increased spending power. The services sector also continues to thrive, with significant contributions from finance, insurance, real estate, and business services.
Meanwhile, India’s position in global value chains is also advancing, evident by the rising share of high-value exports in electronics and machinery.
India’s capital markets also reflect resilience. Between October and December 2024, Foreign Institutional Investors (FIIs) withdrew significant funds due to geopolitical tensions, slower corporate earnings, and China’s economic measures.
However, the Sensex remained relatively stable, strengthened by Domestic Institutional Investors (DIIs), whose increased participation reduced the capital market’s sensitivity to FII outflows since 2020.
Majumdar said, “We noticed that prior to 2020, the sensitivity of the Indian capital market movements to changes in FII was much higher. That has come down after 2020.”
The Indian economy is now grappling with a slowing growth-high inflation conundrum. Food prices remain a major concern, and the RBI has maintained the repo rate at 6.5 per cent to control inflation, aiming to bring retail inflation down to 4 per cent sustainably.
