Indian economy to grow in range of 6.5-6.8% in FY25: Deloitte

Deloitte India on Tuesday projected India's GDP to grow at 6.5-6.8% in the current fiscal and said India will have to adapt to the evolving global landscape and harness its domestic strengths to drive sustainable growth.

In its Economic Outlook report, Deloitte India also said the country needs to decouple from global uncertainties and harness its domestic potential.

Despite global and domestic challenges, India is moving up the global value chains, as highlighted by the rising share of high-value manufacturing exports, particularly in electronics and machinery and equipment.

Deloitte India, in its latest Economic Outlook, has revised its annual GDP growth projection for FY2024-25 to 6.5-6.8%, with expectations for 6.7-7.3% in the following year. The adjustment reflects the need for cautious optimism as the economy navigates rising global trade and investment uncertainties.

In its Economic Outlook report in October, Deloitte India had projected the country's economic growth higher at 7-7.2% for the current fiscal.

"India will have to adapt to the evolving global landscape and harness its domestic strengths to drive sustainable growth. One way to do this would be through economic decoupling from global uncertainties and harnessing India's untapped potential. Several indicators that reveal resilience in certain pockets are worth noting," it said.

As per the first advance estimates released by the National Statistics Office (NSO) earlier this month, India is expected to grow at a 4-year low pace of 6.4% in the current fiscal. The RBI expects growth to be 6.6% in the current fiscal.

"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% of annual targets in the first half, a sharp decline from last year's 49%, and there is a lag in the momentum it needs to gain," Deloitte India Economist Rumki Majumdar said.

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, she added.

Deloitte in its report said the government acknowledges the growing importance of retail investors and is likely to focus on strengthening their participation in the upcoming Union Budget 2025-26.

Measures may include simplifying investment processes, enhancing safety mechanisms to protect household savings from market volatility, and promoting financial literacy through campaigns and incentives.

Additionally, the budget is expected to prioritise capital expenditure, advance skilling initiatives, and accelerate digitisation to bolster economic resilience and mitigate the impact of ongoing global uncertainties.

"India's demographic dividend and growing middle-class wealth are often celebrated for driving consumption demand and strengthening the labour market. But now we know they are also enhancing the stability of the country's financial markets," Deloitte said.