According to Deloitte, the Indian economy will expand by 6.5–6.8 percent in FY25 due to increased domestic consumption.

The Indian economy is expected to expand by 6.5–6.8 percent in FY25 due to increased domestic consumption. Deloitte

December 29, New Delhi (PTI) According to Deloitte on Sunday, the Indian economy is expected to develop at a rate of 6.5–6.8% this fiscal year and a slightly higher rate of 6.7–7.3% in FY2026, driven by domestic consumption.

Growth in the first half of fiscal year 2025 was slower than anticipated, according to Deloitte India Economist Rumki Majumdar, as domestic demand and exports were impacted by election-related uncertainty, severe rainfall, and geopolitical events.

India does, however, still exhibit resilience in certain noteworthy areas, whether it is in the capital market, the expansion of services, the increased proportion of high-value manufacturing in exports, or consumer patterns.

The government's sustained emphasis on digitalization, infrastructure development, and FDI attraction will be the extra growth engine, improving overall effectiveness.

"We remain cautiously optimistic and expect the growth rate to remain between 6.5 and 6.8 per cent this fiscal year and slightly higher between 6.7 and 7.3 per cent in FY2026," Majumdar stated to PTI.

The Reserve Bank of India lowered its growth estimate for the current fiscal year earlier this month from 7.2 percent in June to 6.6%.

Manufacturing exports in high-value industries like electronics, semiconductors, and chemicals, according to Deloitte, demonstrate India's growing influence in global value chains.

Despite large FII outflows over the last two and a half months, capital markets have remained stable because of an increase in both domestic institutional and retail investor involvement.

"We predict that a number of these patterns will continue into 2025. We think that domestic consumption—which includes demand from both rural and urban areas—will continue to be the main driver of India's economic expansion.

"A myriad of factors, such as improved agricultural incomes, targeted subsidies, social welfare programmes, government employment initiatives, advancements in digitisation, and stronger services sector growth will help broad-base consumption spending," Majumdar stated.

Due to a number of global headwinds, India will have to weather the storm. She warned that supply chain interruptions, trade disputes, geopolitical conflicts, and the growing effects of climate change could all have a significant negative influence on growth and long-term economic stability.

Export demand and money flows into the US may be impacted by anticipated policy changes and trade restrictions. Furthermore, if inflation begins to move north, Western central banks could not lower rates as much next year. The RBI's power to manipulate monetary policy will probably be restricted by tighter global liquidity.

According to Majumdar, India's development in the upcoming years will depend on its capacity to economically disentangle itself from international uncertainty.

By concentrating on three aspects, the Indian economy may turn adversity into opportunity. Building on its own strengths would be the first step. By investing in workforce development and employability, we can leverage the demographic dividend and the increasing wealth of the middle class, which will increase consumption, close skill gaps, improve the labor market, and fortify capital markets," she said.

The second would be the focus on developing an independent manufacturing sector that will integrate with the global value chain and satisfy India's growing local demand. 

All eyes will be on the upcoming budget, which could set the tone for these priorities by defining policy measures and strategic investments that prepare the workforce for the future, promoting self-reliance, helping India turn the demographic dividend into a competitive advantage, and improving India's position in global value chains and manufacturing, Majumdar added.