Deloitte India’s Outlook For Indian Economy Remains Positive

Deloitte India’s outlook for the Indian economy remains positive and the country will likely grow at a moderate pace between 6.0 per cent and 6.5 per cent in FY 2023–24, as the global economy continues to struggle.

The recent data revisions by India suggest the economy has fared better than previously believed despite continuing global uncertainties. The International Monetary Fund (IMF) expects India to grow by 5.9 per cent in FY 2023–24 and by an average rate of 6.1 per cent over the next five years.

“We expect investments to see a turnaround and thrust the economy into sustainable growth. India will likely grow at a moderate pace between 6.0 per cent and 6.5 per cent in FY 2023–24, as the global economy continues to struggle," said Rumki Majumdar, Economist, Deloitte India.

Majumdar added that the growth in the next year will likely pick up as investment kickstart the virtuous circle of job creation, income, productivity, demand, and exports supported by favourable demographics in the medium term.

There have been overlapping crises across the globe, the latest being the liquidity troubles after a series of global bank crises. While the impact appears to have been contained, these uncertainties continue to undermine the confidence among consumers and businesses to spend, therefore impacting economic growth.

The World Bank now fears that the ongoing slump in global economic growth will likely result in a “lost decade.” Despite this gloom, market analysts believe that this could well be India’s decade.  And there are enough reasons and data to back this claim, Deloitte added.

“While betting on consumption-driven growth is obvious given India’s large, young, and rising share of the upper middle–income population (with a high propensity to spend), we believe that investment will play an important role over the next two years. It is investments that will provide India with the necessary momentum to take off on a path of sustained domestic demand-led growth for decades to come,” added Rumki.

However, capital investment, especially in the private sector, has lagged so far. India is an attractive investment destination is a point well emphasised. The question is, why private investment has not yet picked up sustainably, and what can policymakers do to take advantage of this window of opportunity?

Deloitte added that it’s true that there’s no prescribed policy intervention for policymakers to follow because of imprecise and volatile information available to them, thanks to the constantly changing economic dynamics. That said, the government must continue calibrating policies and try new approaches to boost investments, as it has done in the past. A three-pronged approach will persuade investors to invest in capacity building.

"This would include a well-balanced monetary policy that prioritises growth without letting down the guard on taming inflation; amplifying efforts in spending on infrastructure while consolidating expenses; and capitalising on services as manufacturing ramps up," said Rumki. 

She also emphasised on the role of the services sector. 

“Growth in services has seen an exceptional rebound and so has its contribution to exports not only in IT but also in non-IT business services. India must reap benefits where it has a comparative advantage and build a robust and efficient ecosystem to bring more MNCs to its shore. This will have a spill-over on investments in the manufacturing space as well,” she added.

The world finally seems to have come out of the pandemic shadow and has learned to live with it. However, geopolitical crises, supply chain reorientations, global inflation and tighter monetary policy conditions will weigh on the outlook, the economist mentioned.

"The good news is, India has endured these challenges and has come out of it more resilient. The fact that it will be the fastest-growing economy despite a slowing global economy is a testimony to that. We hope that the current pressures on the economy too shall pass,” concludes Rumki.