Deloitte Revises India’s GDP Growth Forecast To 6.5-6.8% For 2024-25

Deloitte India has revised its GDP growth projection for 2024-25 to a range of 6.5-6.8 percent, reflecting cautious optimism in light of rising global trade and investment uncertainties.

The multinational professional services firm also forecasted a growth range of 6.7-7.3 percent for the following year.

The adjustment comes as the economy faces challenges from evolving global conditions.

Deloitte’s Economic Outlook noted that the Q2 2024-25 GDP growth was 5.4 percent year-over-year, falling short of market expectations.

In response, the Reserve Bank of India (RBI) reduced its annual growth forecast to 6.6 percent, while the National Statistical Office (NSO) has estimated growth at 6.4 percent for the current fiscal year.

Rumki Majumdar, Economist at Deloitte India noted, “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.”

“Additionally, a tempered global growth outlook, potential shifts in trade regulations among industrial nations, and more stringent monetary policies than previously anticipated in India and the US may hinder the synchronised recovery in Western economies that we anticipated for this fiscal year,” added Majumdar.

Despite these challenges, Deloitte emphasized the need for India to adapt to the evolving global landscape and leverage its domestic strengths.

One of the key areas for potential growth is economic decoupling from global uncertainties and harnessing untapped potential within the country.

Deloitte Highlights Positive Indicators In Rural Consumption

Deloitte highlighted positive indicators such as strong rural consumption, driven by agricultural performance and rising spending power in rural areas.

The services sector, particularly in finance, insurance, real estate, and business services, continues to show growth. This sector plays a crucial role in urban income and services exports, which have recently reached new highs.

India’s capital markets have demonstrated resilience despite significant Foreign Institutional Investor (FII) outflows between October and December 2024, attributed to geopolitical uncertainties, slower corporate earnings, and China’s stimulus measures.

However, the Sensex remained relatively stable, supported by increasing participation from Domestic Institutional Investors (DIIs), which helped counterbalance the FII outflows.

Majumdar noted, “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.”

India’s GDP grew by 5.4 percent in real terms during the July-September quarter of 2024-25, which was lower than the RBI’s forecast of 7 percent.

The April-June quarter also saw slower-than-expected growth.

Additionally, the country faces the challenge of slowing growth alongside high inflation, particularly food prices, which continue to be a pain point for policymakers.

The RBI has kept the repo rate at 6.5 percent to manage inflation and achieve a sustainable 4 percent retail inflation target.

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