India’s slightly slower FY26 growth will likely be tied to broader global trends, including sluggish growth and a delayed synchronous recovery in the West, as anticipated earlier, Rumki Majumdar, director and economist with Deloitte India, wrote on the company website.

Slowing global trade and supply chain disruptions due to intensifying geopolitical uncertainties will also affect demand for exports.

Despite these challenges, Deloitte will continue to see the difference between actual gross domestic product (GDP) and pre-COVID-19 levels progressively narrowing as growth picks up pace.

Growth is likely to pick up, driven by increasing consumer spending, especially in rural India, as inflation subsides, and agricultural output improves after favourable monsoon conditions, she wrote.

India may benefit from higher capital inflows, translating into long-term investment and job opportunities as multinational companies around the world look to reduce operational costs further, according to the US-headquartered audit, consulting, tax and advisory services firm.

Deloitte believes the Indian government’s focus on boosting manufacturing and improving youth employability, coupled with India’s young and aspirational population, presents a unique opportunity for economic growth.

The resilient growth of 6.7 per cent in the first quarter of FY25 amid political and economic uncertainties has increased Deloitte’s confidence in India’s outlook this year, suggesting strong economic fundamentals driving economic activity.

The government’s reduced capital expenditures during the election will likely be made up for in the latter half of the year, thereby boosting the overall economy.

Manufacturing sector capacity utilisation is at an all-time high of 76.4 per cent, which suggests that private investments in the sector will pick up. Higher capex will also crowd in investments, Deloitte said.

Oil prices are expected to remain modest and range-bound, which will help reduce import bills and, therefore, the current account deficit. Besides, low oil prices will also reduce the cost of imported intermediate goods and raw materials, bringing down production costs.

Inflation concerns are fading as expected, with better rainfall and proactive government interventions improving the food supply chain. Inflation may ease further in the latter half of the year. However, stronger growth may also pressure inflation as demand outpaces supply.

Deloitte expects inflation to slowly revert to the central bank’s target level of 4 per cent from early next year and remain within its comfort zone over the forecast period.

Fibre2Fashion News Desk (DS)