The Indian economy could grow between 7-7.2 per cent in the current fiscal on strong government spending, and higher manufacturing investments, but a tempered global growth will impact the outlook for the next fiscal, Deloitte India said on Tuesday. In its ‘India Economy Outlook for October 2024’, Deloitte said the thriving manufacturing sector, stable oil prices, and potential US monetary easing post-elections may boost India’s capital inflows, reduce production costs, and enhance long-term investments and job opportunities.
The economy grew 6.7 per cent year-over-year in the April-to-June quarter of the current fiscal ending March 2025. Although this marks the slowest growth in five quarters, India ranks among the fastest-growing major economies globally.
Deloitte India retains its annual GDP growth projection to be between 7 per cent and 7.2 per cent in FY 2024-2025 and between 6.5 per cent and 6.8 per cent the following year, it said in a statement.
India’s central bank RBI had earlier this month projected the Indian economy to expand 7.2 per cent in the current fiscal buoyed by robust domestic activity.
“Domestic factors such as moderating inflation, especially in food, better rainfall and record Kharif production, stronger government spending in the second half of the year, and rising investment in manufacturing will help in India’s growth this year.
“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,” Deloitte India Economist Rumki Majumdar said.
“However, a tempered global growth outlook and a delayed synchronised recovery in western economies will likely weigh on India’s exports and outlook for the next fiscal year”, she added.
Deloitte said job creation in the economy is key to ensuring a steady household income, and the latest employment data points to some green shoots.
“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 push toward clean-energy alternatives is set to generate green jobs across various sectors, including energy, agriculture, tourism, and transport. Besides, India’s greatest strength’ its young, aspiring population– positions it to gain rapid and substantial returns from the government’s recent efforts in skill development, Deloitte added.
It said the MGNREGA scheme provides temporary jobs to employ people who have limited or no alternate stable income opportunities. For the first time since the pandemic, the scheme’s 12-month moving average ’employment demanded’ number has fallen below pre-pandemic levels in August 2024.
A steady decline probably also points to the possibility of individuals finding better-paying job opportunities elsewhere, it said.
According to Deloitte research, employment shares in the manufacturing and services sectors have also improved modestly. Implementing schemes like production-linked incentives has contributed to the recovery of job shares in manufacturing (11.4 per cent) since the pandemic (10.9 per cent).
The services sector’s share in employment has seen a big jump in the last one year, up from 28.9 per cent in 2022-23 to 29.7 per cent in 2023-24. The biggest employment gain has been in the “other services” category, which includes business and professional services. Additionally, the share of salaried workers, which had declined during the pandemic, is now on the rise again.
