The latest FICCI Economic Outlook survey projects India's GDP growth at a moderate forecast of 6.4% for 2024-25, a slight decline from the 7.0% estimated in the previous survey conducted in September 2024. This represents a significant drop from the forecast of 8.2%. Growth achieved in 2023-24. These projections are in line with general expectations, indicating moderation in economic activity.
The agriculture sector, including allied activities, is expected to grow by 3.6% in 2024-25. Meanwhile, the industry and services sectors are projected to expand by 6.3% and 7.3% respectively. Economic activity is expected to pick up in the second half of the fiscal year on the back of increased public capital expenditure, festive demand and normalization of post-monsoon industrial activity.
Conducted in December 2024, FICCI's survey sought insights from leading economists in industries, banking and financial services. The consumer price index (CPI)-based median inflation forecast for 2024-25 is 4.8%, in line with the Reserve Bank of India's projection for the year.
Outlook for India
For India, economists expressed cautious optimism in light of strong external headwinds. Consumer spending is expected to rise on the back of improvements in the agriculture sector, which is likely to boost rural consumption. Food inflation, which has strained domestic budgets, is expected to ease, and the RBI's monetary easing, lowering interest rates, may further stimulate consumption.
In the investment sector, the government's continued focus on capital expenditure is seen as a key growth driver. Infrastructure investment, particularly in roads, housing, logistics and railways, is expected to maintain momentum through 2025-26. However, concerns remain that private sector investment may remain subdued, and a cautious outlook precludes large-scale capacity expansion. Geopolitical uncertainties and uneven domestic demand, combined with oversupply from China, have kept investors cautious, but a recovery in demand coupled with improved corporate balance sheets could boost private investment.
Economists said the potential impact of Donald Trump's policies could lead to short-term disruptions, particularly to exports, foreign capital flows and input costs. US tax cuts could inflate the fiscal deficit, while higher tariffs and tougher immigration policies could raise costs.
A less-aggressive-than-expected US interest rate cut could reduce capital inflows to emerging markets such as India, leading to volatility in the rupee. Trade tensions, especially between the US and China, could disrupt global supply chains and increase input costs in the short term. However, economists believe that the US may adopt a more measured approach towards India.
On the positive side, India benefits from shifts in global supply chains, particularly in electronic products and pharmaceuticals. India's pharmaceutical industry is well positioned to take advantage of disruptions in the global supply chain, particularly in generics and active pharmaceutical ingredients. The country's role as a manufacturing hub for sectors such as semiconductors, electronics and automotive components can attract FDI, especially with targeted industrial policies.
Economists recommend that India focus on reducing tariffs on certain US imports, diversifying export markets and strengthening cooperation in emerging areas such as artificial intelligence, clean energy and cyber security.
Pay attention to the Union Budget
As India prepares for the Union Budget 2025-26, expected on February 1, 2025, economists highlighted key areas for policy focus. Reviving private consumption is a priority, with recommendations to review the current tax structure to improve disposable income and stimulate spending. Continued investments in welfare programs like MGNREGA, PMGSY and PMAY are also suggested. Economists expect capital expenditure to increase by 10-15% in the upcoming budget due to its strong multiplier effects.
Other recommendations are to increase agricultural productivity, improve rural infrastructure and improve agricultural value chains. Investments in cold storage facilities and supply chain efficiency are critical to managing inflationary pressures and reducing food waste. The manufacturing sector needs continued attention, and reforms in the land, labor and financial sectors are needed to improve the ease of doing business. Regular assessments of policy certainty and regulation are also critical to sustaining growth.
Finally, with India's export prospects under scrutiny, economists are calling for continued support for exporters, including the extension of the interest rate equalization scheme and increased marketing support provision.
Global growth
Looking ahead to 2025, economists expect global growth to maintain a cautiously softened positive trajectory. Price easing and monetary policy easing in major economies, strong growth in interest-sensitive sectors and continued recovery in services are expected to support global growth. Advances in technology, particularly semiconductors, electronics and artificial intelligence, are likely to spur investment, with a focus on greener energy transitions.
However, there are significant risks. Trade policy uncertainties such as rising geopolitical tensions and the potential fragmentation of global trade could hamper growth. Political changes in the United States are also a factor to watch, with possible effects on trade relations and economic conditions. Additionally, ongoing conflicts in the Middle East remain a potential risk for energy markets.
High public debt levels, climate-induced disruptions and challenges related to vulnerability in agriculture and commodity-dependent economies add further complexity to the global outlook.