The latest FICCI Economic Outlook Survey projects India’s GDP growth for 2024-25 at an average forecast of 6.4%, down slightly from the 7.0% estimated in the previous survey in September 2024. This forecast reflects a marked slowdown compared to the 8.2% growth achieved in 2023-24. These projections are in line with general expectations, indicating a moderation in economic activity.
The agriculture sector, including allied activities, is projected to grow by 3.6% in 2024-25. Meanwhile, the manufacturing and services sectors are expected to expand by 6.3% and 7.3%, respectively. Economic activity is expected to pick up in the second half of the year, supported by increased public capital spending, festive demand and normalization of industrial activity after the monsoon.
Conducted in December 2024, the FICCI survey gathered input from leading economists in industry, banking and financial services. The average consumer price index (CPI) inflation forecast for 2024-25 is 4.8%, in line with the Reserve Bank of India’s projection for the year.
Outlook for India
For India, economists expressed cautious optimism in the face of external headwinds. Consumer spending is expected to pick up, boosted by improvements in the agricultural sector that are likely to boost rural consumption. Food inflation, which has strained household budgets, is expected to ease, while the RBI’s monetary easing, which could lower interest rates, could further spur consumption.
On the investment side, the government’s continued focus on capital spending is seen as a key growth driver. Infrastructure investment, particularly in roads, housing, logistics and rail, is expected to maintain momentum through 2025-26. However, there are concerns that private sector investment may remain subdued, with a cautious outlook deterring large-scale capacity expansions. Geopolitical uncertainties and uneven domestic demand, combined with China’s oversupply, have kept investors cautious, although a pick-up in demand, along with improving corporate balance sheets, may boost private investment.
Economists said the potential impact of Donald Trump’s policies could cause short-term disruptions, particularly in exports, foreign capital flows and input costs. Tax cuts in the US could inflate the fiscal deficit, while higher tariffs and stricter immigration policies could raise costs.
A less-aggressive-than-expected cut in US interest rates could lead to reduced capital inflows to emerging markets such as India, which could lead to fluctuations in the rupee. Trade tensions, particularly between the US and China, may also disrupt global supply chains and raise input costs in the short term. However, economists believe the US may take a more measured approach towards India.
On the positive side, India will benefit from changes in global supply chains, particularly in electronics and pharmaceutical manufacturing. India’s pharmaceutical industry is well positioned to take advantage of disruptions in global supply chains, particularly in generics 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 with targeted industrial policies.
Economists recommend that India focus on reducing tariffs on certain US imports, diversifying export markets and strengthening cooperation in emerging areas such as artificial intelligence, clean energy and cyber security .
Focus for the Union budget
As India prepares for the Union Budget 2025-26, due on February 1, 2025, economists highlighted key areas for policy focus. Reviving private consumption is a priority, with recommendations for a review of the current tax structure to improve disposable income and stimulate spending. Continued investments in welfare schemes like MGNREGA, PMGSY and PMAY are also suggested. Economists expect a 10-15% increase in capital spending in the next budget, given its strong multiplier effects.
Other recommendations include increasing agricultural productivity, improving rural infrastructure and improving agricultural value chains. Investments in cold storage facilities and supply chain efficiency are critical to managing inflationary pressures and minimizing food waste. The manufacturing sector should continue to receive attention, and reforms are needed in the land, labor and financial sectors to improve the ease of doing business. Policy certainty and regular assessments of regulations are also vital to sustaining growth.
Finally, with India’s export prospects under scrutiny, economists are calling for continued support for exporters, including the expansion of the interest equalization scheme and increased marketing support allocations.
Global growth
Looking ahead to 2025, economists expect global growth to maintain a positive trajectory, tempered by caution. Softening prices and easing monetary policy in key economies, along with strong growth in interest-sensitive sectors and a continued recovery in services, are expected to support global growth. Technological advances, particularly in semiconductors, electronics and artificial intelligence, along with attention to green energy transitions, are likely to spur investment.
However, substantial risks remain. Rising geopolitical tensions and trade policy uncertainties, such as the potential fragmentation of global trade, could hamper growth. Political changes in the US are also a factor to watch, with possible impacts on trade relations and economic conditions. In addition, the ongoing conflict in the Middle East remains a potential risk to energy markets.
Challenges related to high levels of public debt, climate-induced disruptions and the vulnerability of agriculture- and commodity-dependent economies add further complexity to the global outlook.