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.
"Over the past four fiscals, India’s resilience to shocks has been well chronicled. This trend should continue in the short term and strengthen over the medium term. A more broad-based revival in capital expenditure, ongoing reforms momentum and advances in digital and physical connectivity will be the enablers. We see fiscal consolidation and monetary policy coordination paving the path for stable policy setting."
Dipti Deshpande Principal Economist CRISIL Ltd
"Over the past few fiscals, central and state spending has front-ended India’s capex sprint. With improvement in utilisation and deleveraged balance sheets, private capex recovery is finally visible. Opportunities across emerging sectors will arise over the medium term with India progressing to become an integral part of the global supply chain."
Miren Lodha Director - Research CRISIL Market Intelligence & Analytics CRISIL Ltd
"Over the past four fiscals, India’s resilience to shocks has been well chronicled. This trend should continue in the short term and strengthen over the medium term. A more broad-based revival in capital expenditure, ongoing reforms momentum and advances in digital and physical connectivity will be the enablers. We see fiscal consolidation and monetary policy coordination paving the path for stable policy setting."
Dipti Deshpande
Principal Economist
CRISIL Ltd
"Over the past few fiscals, central and state spending has front-ended India’s capex sprint. With improvement in utilisation and deleveraged balance sheets, private capex recovery is finally visible. Opportunities across emerging sectors will arise over the medium term with India progressing to become an integral part of the global supply chain."
Miren Lodha
Director - Research
CRISIL Market Intelligence & Analytics
CRISIL Ltd