The Indian economy is projected to expand by 7-7.2 per cent in the current fiscal year due to strong economic fundamentals and the continuation of domestic policy reforms, according to a statement from Deloitte India on Monday.
Deloitte's India Economic Outlook for August highlighted that various measures in the Union Budget 2024-25 aimed at enhancing agricultural productivity, generating employment for young people, enhancing the manufacturing sector, and addressing the issue of access to finance for micro, small, and medium enterprises (MSMEs) would contribute to improving supply-side demand, controlling inflation, and boosting consumer spending, particularly in rural areas.
Rumki Majumdar, an economist at Deloitte India, stated that India is expected to experience robust growth in the latter half of the year following a period of uncertainty in the first six months.
"Key contributing factors include the continuity in domestic policy reforms, reduced uncertainties in the US post-elections, and more synchronous global growth within a low inflation regime.
"Additionally, improved global liquidity conditions, as central banks in the West ease their monetary policy stance, will enhance capital flows and drive higher investments, particularly in the private sector," Majumdar said.
The Economic Outlook report observed that strong economic fundamentals would drive GDP growth between 7 per cent and 7.2 per cent in FY25. It said that effectively addressing the urban-rural consumer spending gaps, inflation, and employment concerns can significantly enhance the affordability of aspirational rural consumers.
"The much-desirable policy pivot was evident in the Union Budget presented last month. Reducing the urban and rural spending gap in the coming years will ensure sustained consumer demand from a larger consumer base," it added.
Deloitte India's growth projection is at par with that of RBI, which projected FY'25 growth at 7.2 per cent. It is higher than Finance Ministry's Economic Survey which estimated GDP expansion between 6.5-7 per cent.
The economy of India expanded by 8.2 per cent in the fiscal year 2023-24.
The report also mentioned that despite robust growth, there has been modest private consumption spending in the last five years. Factors such as the pandemic, high global and domestic inflation, tighter financial conditions, and the impact of poor agricultural output on rural demand have constrained private consumption growth in India.
However, a study by Deloitte revealed that India is experiencing noticeable and widespread changes in consumption patterns. There is a noticeable shift in the types of goods and services being consumed towards more non-food and discretionary items, indicating lasting changes in lifestyles and preferences.
Based on the Household Consumption Expenditure Survey, expenditure on discretionary goods and services (including transportation) has increased in both rural and urban India. Rural spending on discretionary durable goods (such as automobiles, electric, and electronic goods) has caught up with urban spending in just one decade.
"Demand for processed food has been among the highest in most states, suggesting a shift towards ready-to-eat options. Rapid urbanisation, increasing women's participation in the workforce, and enhanced marketing and availability are driving these changing dietary habits," the report said.
According to a study by Deloitte, in cases where rising incomes in states lead to a fairly even distribution and increased spending in rural areas, companies can reach a greater portion of the state’s rural population. This grants businesses the ability to connect with a substantial consumer base and encourages consistent consumer spending, as opposed to states where the gap is widening.
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