GDP growth for 2024-25 expected to reach 6.4%: ITCI Economic Outlook Survey

The latest Federation of Indian Chambers of Commerce and Industry (FICCI) Economic Outlook Survey forecasts India’s GDP growth for 2024-25 with an average forecast of 6.4%, a slight decline from the 7.0% estimated in the previous survey conducted in September 2024. These forecasts reflect a slowdown significantly compared to 8.2%. Growth achieved in 2023-24. These forecasts are consistent with general expectations, indicating moderation in economic activity.

The agricultural sector, including related activities, is expected to grow by 3.6% in the period 2024-2025. Meanwhile, the industrial and services sectors are expected to grow by 6.3% and 7.3%, respectively. Economic activity is expected to pick up in the second half of the fiscal, supported by increased public capital expenditure, festive demand, and a return to normal in industrial activity after the monsoon.

The FICCI survey was conducted in December 2024 and collected insights from leading economists in the industry, banking and financial services. The average inflation forecast based on the Consumer Price Index (CPI) for 2024-25 is 4.8%, in line with the Reserve Bank of India’s forecast for this year.

Outlook for India

For India, economists expressed cautious optimism in light of external headwinds. Consumer spending is expected to rebound, driven by improvements in the agricultural sector that are likely to boost consumption in rural areas. Food inflation, which has strained household balance sheets, is expected to ease, while monetary easing by the Reserve Bank of India, which will likely lead to interest rate cuts, could further stimulate consumption.

On the investment front, the government’s continued focus on capital spending is seen as a key driver of growth. Investments in infrastructure, especially in roads, housing, logistics and railways, are expected to maintain their momentum until 2025-2026. However, there are concerns that private sector investment will remain weak, with cautious expectations hampering large-scale capacity expansions. Geopolitical uncertainty and uneven domestic demand, combined with increased supply from China, have kept investors cautious, although a recovery in demand, coupled with improving corporate balance sheets, may boost private investment.

Economists said the potential impact of Donald Trump’s policies could cause short-term disruptions, especially in exports, foreign capital flows and input costs. US tax cuts could swell the fiscal deficit, while higher tariffs and stricter immigration policies could push up costs.

It is possible that lower interest rates in the United States, less aggressively than expected, could lead to reduced capital flows to emerging markets such as India, which could lead to fluctuations in the value of the rupee. Trade tensions, especially between the United States and China, may disrupt global supply chains and increase input costs in the short term. However, economists believe that the US may adopt a more moderate approach towards India.

On the positive side, India is expected to benefit from shifts in global supply chains, especially in electronics and pharmaceutical manufacturing. India’s pharmaceutical industry is well positioned to benefit from disruptions in global supply chains, especially in generic medicines and active pharmaceutical ingredients. The country’s role as a manufacturing hub for sectors such as semiconductors, electronics, and automotive components could attract foreign direct investment, especially under targeted industrial policies.

Economists recommend that India focus on reducing tariffs on some US imports, diversifying export markets, and strengthening cooperation in emerging fields such as artificial intelligence, clean energy and cybersecurity.

Focus on the union budget

As India prepares for the Union Budget for 2025-26, expected on February 1, 2025, economists have highlighted key areas for policy focus. Reviving private consumption is a priority, with recommendations to review the current tax structure to enhance disposable income and stimulate spending. It also suggests continued investments in social welfare schemes like MGNREGA, PMGSY and PMAY. Economists expect an increase in capital spending of 10-15% in the next budget, due to its strong multiplier effects.

Additional recommendations include enhancing agricultural productivity, improving rural infrastructure, and strengthening agricultural value chains. Investments in cold storage facilities and supply chain efficiency are critical to managing inflationary pressures and reducing food waste. The manufacturing sector should continue to receive attention, and reforms in land, labor and the financial sector are necessary to improve the ease of doing business. Certainty in policies and regular evaluations of systems are also vital for sustainable growth.

Finally, with India’s export prospects under scrutiny, economists are calling for continued support for exporters, including expanding the scope of the interest equalization scheme and increasing marketing support allocations.

Global growth

Looking to 2025, economists expect global growth to maintain a positive trajectory, tempered by caution. Falling prices and easing monetary policy in major economies, coupled with strong growth in interest rate-sensitive sectors and a continued recovery in services, are expected to support global growth. Advances in technology, especially in semiconductors, electronics, and artificial intelligence, along with a focus on green energy transitions, are likely to stimulate investment.

However, there are still significant risks. Rising geopolitical tensions and trade policy uncertainties, such as the potential fragmentation of global trade, could hinder growth. Political changes in the United States are also a factor to watch, with potential impacts on trade relations and economic conditions. In addition, the ongoing conflict in the Middle East remains a potential risk to energy markets.

Challenges associated with high levels of public debt, climate-induced disruptions, and the fragility of agricultural and commodity-dependent economies further complicate the global outlook.