India’s annual GDP growth is projected to be between 7 and 7.2 per cent in FY 2024-2025, a Deloitte report said on Tuesday, which is in line with the Reserve Bank of India’s (RBI) prediction of the country witnessing real GDP growth at 7.2 per cent for FY25.
Dr. Rumki Majumdar from Deloitte India said that India’s economy is emerging with resilience as the dust settles after a high-stakes elections period.
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“Its gross domestic product grew 6.7 per cent year over year in the April-to-June quarter. While that was the slowest rate in five quarters, India remains one of the world’s fastest-growing large economies, and Deloitte’s analysis predicts continued strength in the year ahead,” she mentioned in the ‘India economic outlook, October 2024’
Growth is likely to pick up, driven by increasing consumer spending, especially in rural India, as inflation subsides, and agricultural output improves after favourable monsoon conditions.
“India may benefit from higher capital inflows, translating into long-term investment and job opportunities as multinational companies around the world look to reduce operational costs further,” said the report.
The government’s focus on boosting manufacturing and improving youth employability, coupled with India’s young and aspirational population, presents a unique opportunity for economic growth.
As the country advances toward becoming a $5 trillion economy by fiscal 2027 to 2028, expanding manufacturing and emerging industries and transitioning toward clean-energy alternatives are likely to create high-quality, formal, and green jobs.
“This will help many Indian states that are aspiring to grow rapidly, as they are already investing in these areas to tap into India’s demographic advantage. Subsequently, the improvements in the labour market will likely be reflected in future surveys,” said Dr Majumdar, a Director and economist with Deloitte India.
Rural consumption spending is rebounding due to moderating inflation, specifically in food. Besides, better rainfall (over June to September, precipitation in the country as a whole was 109 per cent of its long-period average in 2020, and it has been the third highest since 1994) and all-time high production and stock of kharif crops (such as rice and paddy sown during the monsoon season from June to August) point to robust agricultural output this year, thereby further pushing rural demand.
This will likely factor into spending during festive months and beyond, said the report. Manufacturing sector capacity utilisation is at an all-time high of 76.4 per cent, which suggests that private investments in the sector will pick up. Higher capex will also crowd in investments.
“We expect India to grow between 7 per cent and 7.2 per cent in fiscal 2024 to 2025 in our baseline scenario, followed by between 6.5 per cent and 6.8 per cent in fiscal 2025 to 2026 (admittedly, slightly lower than previously estimated),” said Dr. Majumdar.
India’s slightly slower growth in the subsequent year will likely be tied to broader global trends, including sluggish growth and a delayed synchronous recovery in the West, as anticipated earlier.
