Indian Economy Set To Grow 7-7.2% In FY25: Deloitte Report

Deloitte maintains its annual GDP growth forecast for FY 2024-2025 at 7 per cent to 7.2 per cent, with a projection of 6.5 per cent to 6.8 per cent for the following year

Deloitte notes that several domestic factors will support India's growth this year

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The Indian economy is projected to grow between 7 per cent and 7.2 per cent in the current fiscal year, driven by strong government spending and increased investments in manufacturing. However, a slowdown in global growth may affect the outlook for the next fiscal year, according to Deloitte India’s 'India Economy Outlook for October 2024.'

The report highlights a thriving manufacturing sector, stable oil prices, and potential monetary easing in the US post-elections as factors that could enhance India's capital inflows, lower production costs, and foster long-term investments and job creation. In the April-to-June quarter of the current fiscal year, the economy grew by 6.7 per cent year-over-year, marking the slowest growth in five quarters, yet India remains one of the fastest-growing major economies globally.

Deloitte maintains its annual GDP growth forecast for FY 2024-2025 at 7 per cent to 7.2 per cent, with a projection of 6.5 per cent to 6.8 per cent for the following year. Earlier this month, the Reserve Bank of India (RBI) anticipated a 7.2 per cent expansion for the current fiscal, bolstered by robust domestic activity.

Deloitte notes that several domestic factors will support India's growth this year, including moderating inflation, improved rainfall, record Kharif production, increased government spending in the latter half of the year, and a rise in manufacturing investments. 

Rumki Majumdar, an economist at Deloitte India, stated, "Higher capital inflows after the US Fed's rate cuts may translate into long-term investment and job opportunities as multinational companies worldwide look to further reduce operational costs."

However, she cautioned that a tempered global growth outlook and a delayed synchronized recovery in Western economies could weigh on India's exports and future outlook.

Deloitte emphasised that job creation is essential for ensuring steady household incomes, with recent employment data indicating some positive trends. "India will need more formal and quality jobs to ensure better income distribution. The emphasis on manufacturing and the rise in emerging industries, such as semiconductors and electronics that require advanced education and specialised skills will create more high-quality jobs," it said.

Additionally, India’s shift towards clean energy is expected to generate green jobs across various sectors, including energy, agriculture, tourism, and transportation. Deloitte also pointed out that India’s greatest asset—its young, ambitious population—positions the country to reap significant benefits from the government's recent skill development initiatives.

The MGNREGA scheme continues to provide temporary jobs for individuals with limited stable income opportunities. Notably, for the first time since the pandemic, the scheme's 12-month moving average for employment demanded fell below pre-pandemic levels in August 2024. This decline may suggest that individuals are finding better-paying job opportunities elsewhere.

Deloitte's research indicates a modest improvement in employment shares within the manufacturing and services sectors. Initiatives like production-linked incentives have helped recover job shares in manufacturing from 10.9 per cent during the pandemic to 11.4 per cent. The services sector has also seen significant growth in employment share, increasing from 28.9 per cent in 2022-23 to 29.7 per cent in 2023-24, particularly in the "other services" category, which includes business and professional services. Furthermore, the share of salaried workers, which had declined during the pandemic, is now on the rise again.