Despite the second quarter of FY25 seeing 5.4-per cent economic growth—significantly below the central bank’s projection of 6.8 per cent—Deloitte has noticed resilience in certain pockets in the quarter that include a robust rural consumption, strong manufacturing exports and the services sector continuing to be a key growth driver.
Given that micro, small and medium enterprises are significant contributors to manufacturing supply chains and exports, rising performance of these enterprises points to healthy growth in this export segment, it noted.
Deloitte recently revised its annual GDP growth projection for India to 6.5-6.8 per cent for fiscal 2024-25 (FY25) and 6.7-7.3 per cent for FY26.
It believes the slow growth in the secondary sector is temporary due to disruptions caused by monsoons and restrictive spending during elections.
Deloitte suggested the government should prioritise targeted measures to drive investments.
“A tempered global growth outlook and a delayed synchronised recovery in the industrial economies amid changing trade and policy regulations—compared to what was previously expected—will likely weigh on India’s exports and outlook for the next fiscal year. India will have to adapt to the evolving global landscape and harness its domestic strengths to drive sustainable growth,” Deloitte said in a release.
It believes the slow growth in the secondary sector is temporary due to disruptions caused by monsoons and restrictive spending during elections.
As the government prepares for the next budget, Deloitte suggested it should prioritise targeted measures to drive investments, emphasizing increased participation of domestic institutional investors and securely channeling household savings into capital markets with protective safeguards.
What is concerning is we also suspect the possibility of higher dumping from neighboring countries. Imports of goods such as plastics, organic chemicals, iron and steel products, machinery, and electronic components have seen a sharp jump in recent months and pose a significant threat in the months ahead amid restrictive trade regulations in industrialised nations, Deloitte cautioned.
A significant uptick in Indian government spending is expected in the second half of this fiscal to meet budgetary targets, which may provide additional support to the economy and boost investment by crowding in private investments.
Core inflation—which is below the central bank’s target—has also been inching upward, a trend that could potentially spiral up inflationary expectations and dampen consumer spending, Deloitte noted.
Policy changes in industrialised nations could potentially alter supply chains and trade regulations, potentially affecting global trade dynamics and reducing demand for Indian exports, it added.
Fibre2Fashion News Desk (DS)
