India Outlook 2024 Report

At 6.8%, India to stay the fastest-growing large economy; emerging sectors in spotlight

The next seven fiscals will see the Indian economy crossing the $5 trillion mark and inching closer to $7 trillion

Fiscal 2025 will see growth moderating

After a better-than-expected 7.6% this fiscal, India’s real GDP growth will likely moderate to 6.8% in fiscal 2025.

The transmission of the rate hikes effected by the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) between May 2022 and February 2023 still continues and is likely to weigh on demand next fiscal. On the other hand, regulatory actions to tame unsecured lending will have a bearing on credit growth.

A lower fiscal deficit will mean the fiscal impulse to growth will be curtailed. But the nature of spending will provide some support to the investment cycle and rural incomes.

We also expect a normalisation of the net tax impact on GDP witnessed this fiscal.

Uneven economic growth for key trade partners and an escalation of the ongoing Red Sea crisis can be a drag on exports.

That said, some factors will continue to underpin growth next fiscal. Continued disinflation will support the purchasing power of consumers. This assumes a spell of normal monsoon in calendar 2024, which can lift agricultural growth on a low base. And a gradual pick-up in private sector capex will make investment growth more broad-based.

Net-net, amid the interplay of these factors, India will retain its position as the fastestgrowing large economy.

Interestingly, the next seven fiscals (2025-2031) will see the Indian economy crossing the $5 trillion mark and inching closer to $7trillion. A projected average expansion of 6.7% in this period will make India the third-largest economy in the world and lift per capita income to the upper middle-income category by 2031.