India's GDP Projections for 2024-25 Fiscal Year

India's GDP is projected to grow between 6.5% and 6.8% in the fiscal year 2024-25, according to the latest Economic Outlook by Deloitte India. This forecast underscores a cautious optimism amidst global economic uncertainties. The subsequent year is expected to see a growth range of 6.7% to 7.3%, indicating a gradual recovery and resilience in the Indian economy.

Challenges and Opportunities Ahead

Rumki Majumdar, an economist at Deloitte India, highlighted several factors contributing to the tempered growth outlook, including election uncertainties, weather-related disruptions in construction and manufacturing, and a lag in government capex momentum. Despite these challenges, the report identifies bright spots such as strong rural consumption, thriving services sector, and India's advancing position in global value chains.

Capital Markets Reflect Resilience

Between October and December 2024, Foreign Institutional Investors (FIIs) withdrew significant funds due to geopolitical tensions and slower corporate earnings. However, the Sensex remained stable, bolstered by increased participation from Domestic Institutional Investors (DIIs). This shift has reduced the capital market's sensitivity to FII outflows since 2020, showcasing the resilience of India's financial markets.

Inflation and Monetary Policy

The Indian economy faces a slowing growth-high inflation dilemma, with food prices remaining a major concern. The Reserve Bank of India (RBI) has maintained the repo rate at 6.5% to control inflation, aiming to sustainably bring retail inflation down to 4%.