Deloitte Global Economics Research Centre revises India growth prediction to 7.8% in fiscal 2024

The Deloitte Global Economics Research Center has raised its growth forecast for India, projecting a range of 7.6 per cent to 7.8 per cent attributing the increase to GDP revisions and robust growth in fiscal 2024. India's GDP took a leap on Leap Day in 2024, surprising analysts with a growth rate of 8.4 per cent in the third quarter of the fiscal year 2024.

This performance far exceeded earlier projections, with Deloitte's forecast ranging between 7.1 per cent and 7.4 per cent. India's economic performance has exceeded expectations, with the recent leap in GDP growth marking a remarkable achievement.India's economic trajectory has been a subject of considerable attention as the country continues to register impressive growth figures, leaving analysts wondering if India is on a path of unprecedented progress.

The recent leap in GDP growth, surpassing expectations, coupled with evolving consumer spending patterns and concerns over rising household debt, paints a complex picture of India's economic landscape. However, uncertainties loom over the fourth quarter due to the 2024 general elections and modest consumption growth, leading to a more conservative outlook.

Deloitte expects GDP growth to be around 6.6 per cent in the next fiscal year, gradually stabilizing at 6.75 per cent in fiscal 2026, considering geopolitical uncertainties. This edition of the India Economic Outlook delves into the evolving consumer spending patterns, shedding light on the rise of the middle-income class and its impact on private consumer expenditure growth.

Despite fluctuations post-pandemic, there's a noticeable shift in consumption patterns, with luxury and high-end products gaining traction faster than basic goods. The increasing number of middle- to high-income households with rising disposable income is expected to amplify this trend, driving overall consumer expenditure growth.

The third quarter's impressive GDP growth was fuelled by a surge in private investment spending, indicating India's readiness for a robust boost to the private capital expenditure cycle. Private consumption also improved, driven by a revival in consumer durables and vehicle sales, showcasing resilient domestic demand.

However, government consumption contracted, and export growth slowed, mitigated by declining imports due to falling crude oil prices. While GDP surged, Gross Value Added (GVA) grew at a slower rate, leading to concerns over excessive demand and inflationary pressures due to poor agricultural output. 

This gap underscores the need for balanced economic growth to ensure sustainable development. The near-term outlook remains optimistic, with expectations of continued growth driven by improved capital flows, rebounding exports, and synchronized global recovery.

However, inflation concerns persist, compounded by rising food prices and excess demand. Prudent fiscal measures are necessary to manage inflationary pressures effectively. Amidst the economic boom, rising household debt has emerged as a significant concern, with liabilities soaring and savings declining.

While India's household debt levels are lower compared to other nations, the recent surge poses risks to long-term growth sustainability. To sustain growth, measures such as creating more employment opportunities, monitoring credit growth, and promoting responsible borrowing are crucial.

Additionally, income support programs and financial education initiatives can help mitigate income disparity and reduce the reliance on debt for consumption. India's economic journey reflects a blend of remarkable growth prospects and underlying challenges. As the country embraces aspirational spending patterns, it must address the risks associated with rising household debt to ensure inclusive and sustainable growth in the long run.

Balancing economic expansion with prudent fiscal management remains key as India charts its course towards becoming a global economic powerhouse.