GlobalData Raises India’s Growth Forecast on Strong Domestic Consumption, Investor Confidence

India’s economy is thriving, bolstered by strong domestic demand, rural consumption, and a growing working-age population. Infrastructure investments are enhancing productivity in the manufacturing and services sectors, fostering high investor confidence. Therefore, analytics company GlobalData has revised India’s 2024 and 2025 economic growth forecasts up by 0.3 and 0.2 percentage points in its Q4 update, compared to the Q3 projections.

GlobalData’s latest report, “Macroeconomic Outlook Report: India,” reveals that India’s GDP increased by 7.6% in 2023 and is projected to grow by 7.0% in 2024 and 6.6% in 2025. Inflation is expected to decrease to 4.4% in 2024, down from 5.6% in the previous year.

A Resilient Economy

To combat inflation, the Reserve Bank of India (RBI) has kept the repo rate steady at 6.5% for the 10th consecutive meeting in October 2024. This proves its commitment to stabilizing prices and supporting economic growth amidst the changing economic conditions.

Moreover, the rebound in India’s private consumption is indicated by a 7.4% rise in Private Final Consumption Expenditure (PFCE) for Q2 2024. This suggests increased economic resilience and a potential boost in rural spending. This recovery, fueled by lower inflation and improved agricultural performance, may enhance the overall GDP growth, supporting investor confidence.

For Gayatri Ganpule, Economic Research Analyst at GlobalData,

“Despite the geopolitical uncertainties, India’s economy shows resilience. Although inflation increased in September 2024, the projected annual rate of 4.4% is lower than last year’s 5.6%. This expected lower price level, along with the festive season, is expected to boost consumption in Q4 2024. However, rising oil prices are a major concern, as India relies on imports for about 88% of its oil needs, risking imported inflation.”

Strategic Reforms

Financial intermediation, real estate, and business activities contributed 22.7% to the gross value added (GVA) in 2023. They are followed by mining, manufacturing, and utilities (18.7%) and agriculture (17.7%). In nominal terms, the three sectors are forecast to grow by 11.9%, 9.5%, and 9.7%, respectively, in 2024.

India’s 2024-25 budget prioritizes job creation and enhancing the business environment through strategic tax reforms to attract foreign investment. This includes a review of the Income-tax Act, an amnesty scheme for tax disputes, and incentives for job creation. Simplifying foreign direct investment frameworks and adjusting capital gains taxes are expected to stimulate economic growth. These initiatives aim to resolve tax disputes and foster a more favorable investment climate.

FDI and Exports

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Indian Industry Looks Forward to a Record-Breaking Future

India’s net foreign direct investment (FDI) increased to $6.9 billion in Q2 2024, up from $4.7 billion during the same period last year, as per the RBI data. This growth was driven by a 26.4% rise in gross inward FDI, totaling $22.5 billion. Sectors such as manufacturing, financial services, and energy contributed to 80% of these inflows, primarily from Singapore and the US.

Last week, during a roundtable meeting, Indian Prime Minister Narendra Modi engaged with business leaders from Singapore. This led to a commitment of approximately $60 billion in investments across various sectors in India.

On the external front, India aims to achieve $2 trillion in exports by 2030 under its new Foreign Trade Policy. The country recorded a current account surplus of $5.7 billion in Q1 2024, driven by service exports and remittances. As of 10 March 2024, India signed 14 free trade agreements, including one with the European Free Trade Association (EFTA), to improve exports and market access, seeking preferential ties with 94 countries. The ongoing negotiations could extend these agreements to over 120 countries, strengthening India’s global trade relationships.

In the GlobalData Country Risk Index (GCRI Q2 2024), India is ranked 75th out of 153 nations. It is categorized as a medium-risk nation. This score is lower in terms of political, legal, technology, and infrastructure risk parameters when compared with the average score of the world.