India's GDP Likely To Grow 6.6% In FY25: Deloitte

Deloitte observed that while consumer spending post-pandemic has been fluctuating, there is a noticeable shift in consumption patterns. Demand for luxury products and services is growing faster

Deloitte India projected India's GDP growth for the ongoing fiscal year to be 6.6 per cent, attributing this growth to increased consumption expenditure, a resurgence in exports, and augmented capital flows. According to Deloitte's India Economic Outlook report released on Friday, the expansion of the middle-income demographic has resulted in heightened purchasing power, fueling demand for upscale luxury goods and services.

It was stated that with the anticipation of the middle-to-high-income segments representing one in two households by 2030/31, an increase from the current one in four, this trend is expected to gain further momentum, contributing to the overall growth in private consumer expenditure. Deloitte has adjusted its economic growth forecast for India for the previous fiscal year to 7.6 to 7.8 per cent. Previously, in January, the firm had projected growth for the fiscal year 2023-24 to fall within the range of 6.9 to 7.2 per cent.

According to Deloitte's quarterly update on the economic outlook, the nation's GDP growth is expected to hit approximately 6.6 per cent in FY 2024-25 and 6.75 per cent in the subsequent year. This projection comes as markets adapt to incorporating geopolitical uncertainties into their investment and consumption strategies.

"The global economy is expected to witness a synchronous rebound in 2025 as major election uncertainties get sorted out and the central banks of the West may announce a couple of rate cuts later in 2024. India will likely see improved capital flows and a rebound in exports," said Deloitte India Economist Rumki Majumdar.

The robust growth figures witnessed over the past two years have helped the economy catch up with pre-COVID trends. Investment, bolstered by substantial government expenditure on infrastructure, has played a pivotal role in sustaining India's steady recovery momentum, she said.

However, concerns persist regarding inflation and geopolitical uncertainties, which are contributing to elevated food and fuel prices. Nonetheless, the anticipation of an above-normal monsoon is expected to offer some relief by positively impacting agricultural output, thus alleviating pressure on food prices. Despite these mitigating factors, inflation is projected to remain above the Reserve Bank of India's target level of 4 per cent throughout the forecast period, attributed to robust economic activity, according to Majumdar.

Deloitte's GDP growth projection for FY25 aligns closely with estimates provided by the World Bank. However, it falls below projections from the RBI and other agencies. The RBI has forecasted a 7 per cent growth rate for the Indian economy in the current fiscal year.

Meanwhile, the Asian Development Bank (ADB) and Fitch Ratings have also estimated growth at 7 per cent. On the other hand, the International Monetary Fund (IMF), S&P Global Ratings, and Morgan Stanley have projected a slightly lower growth rate of 6.8 per cent for FY25.

Deloitte observed that while consumer spending post-pandemic has been fluctuating, there is a noticeable shift in consumption patterns. Demand for luxury and high-end products and services is growing faster than the demand for essential goods.

"India is seeing a prominent shift in consumer behaviour toward aspirational spending, which is inevitable in any nation that experiences growing economic prosperity. India's spending share in the luxury and premium goods and services category (such as spending on transport, communication, recreation, etc.) has traditionally been lower than nations such as the United States, China, Japan, and Germany. So, there is, therefore, potential for this ratio to increase further as consumer income grows," Majumdar said.