India's Economic Growth Projected at 7-7.2% for FY25

India’s Economic Growth Projected at 7-7.2% for FY25

Deloitte India projects the economy will grow between 7.0% and 7.2% in FY25, despite a slowdown to 6.7% in Q1. Key growth drivers include moderating inflation, record Kharif crop production, and increased government spending.

Piyush Shukla Published On October 23rd, 2024

Deloitte India’s latest Economic Outlook projects that India’s economy will grow between 7.0% and 7.2% in the fiscal year 2024-25, despite a recent slowdown where GDP expanded by only 6.7% year-on-year in Q1 of FY25. This growth is driven by favorable domestic conditions, including strong manufacturing activity, stable oil prices, and anticipated easing of U.S. monetary policy, which could boost capital inflows. The Reserve Bank of India (RBI) supports this outlook with a growth projection of 7.2%, reflecting confidence in India’s economic resilience.

Key Growth Drivers

Deloitte highlights several factors fueling this positive outlook:

Inflation and Crop Production: Moderating inflation and record Kharif crop production will bolster growth.

Government Spending: Increased government expenditures are expected to enhance economic momentum.

Employment Trends: There are positive signs in employment, particularly in the construction sector, which has seen a rise in job share from 11.6% to 12.2% since 2019-20. The demand for MGNREGA jobs has fallen below pre-pandemic levels, indicating improved job opportunities.

Sectoral Improvements

Manufacturing Sector: The production-linked incentive (PLI) schemes are aiding employment recovery in manufacturing, with its share in employment increasing to 11.4%.

Service Sector Growth: The services sector’s employment share rose from 28.9% in 2022-23 to 29.7% in 2023-24.

Female Labor Force Participation: Notably, female labor participation has surged from 22% in 2017-18 to 40.3% in 2023-24, reflecting greater inclusivity.

Challenges and Future Outlook

Despite these gains, challenges remain, particularly in informal sectors where job security and social protection are limited. However, India’s focus on clean energy and emerging industries, like semiconductors and electronics, is expected to generate new employment opportunities. Deloitte expresses optimism, citing that continued domestic policy reforms and improved global liquidity conditions will further drive investments, ensuring sustained economic growth amid global uncertainties.