India Set to Remain the Fastest-Growing Major Economy Worldwide: Report
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New Delhi, Jan 10 (NationPress) India will continue to stand out as the fastest-growing major economy globally in the coming years, with an anticipated improvement in growth momentum by 2025 as government spending resumes and consumer sentiment remains resilient, according to a report from Franklin Templeton.
The structural growth outlook for India's economy remains robust, with various indicators suggesting that the slowdown anticipated in 2024 will be temporary, the report indicated.
"Overall, we believe India can comfortably sustain its position as the world's fastest-growing major economy, with projected GDP growth of approximately 6.5 percent until at least 2029. The rise in income levels and the expansion of the middle class are expected to occur concurrently. We anticipate the number of affluent and middle-class individuals in India to increase by 400 million. Notably, the population within India's wealthiest class could triple," the report detailed.
"We also maintain an optimistic view on India’s dynamic digital economy and its beneficiaries, along with the structural growth potential in the healthcare sector," it added.
India's economic growth experienced a slowdown in 2024, with a year-on-year GDP growth rate of only 5.4 percent during the fiscal second quarter (July-September), marking the lowest growth in seven quarters. Consequently, growth for the full fiscal year ending March 2025 is projected to be 6.6 percent, a decline from 8.2 percent from the previous year, according to forecasts by the Reserve Bank of India (RBI).
The report stated that the slowdown is temporary, primarily attributed to postponed government spending in an election year. Additionally, heavy summer monsoon rains disrupted economic activities. Several high-frequency indicators are showing signs of improving conditions that may lead to a recovery in growth.
Government expenditure has been increasing since September, indicating a gradual ramp-up in spending on priority initiatives, particularly in infrastructure and rural development. Importantly, a resurgence in government spending and activities is expected to synergize with capital expenditure (capex) growth in the private sector. For example, expedited approvals for construction and engineering projects will enhance company confidence to invest and hire more vigorously.
Private consumption plays a significant role in India’s economy and is showing stronger growth momentum in the latter half of this year. Consumer sentiment remains resilient, and optimism for the year ahead has remained stable, suggesting a recovery post-election. Consumption growth should receive additional support if inflation decreases in 2025. The Consumer Price Index (CPI) inflation rate is expected to decline from 5.7 percent in the October-December quarter of 2024 to 4 percent in the July-September quarter of 2025, based on RBI forecasts, the report mentioned.
The revival of government spending, private sector capex growth, and the resilience of domestic consumption, among other factors, may help India's economy return to a state of normalcy by 2025. As growth accelerates once more, the conditions will be favorable for an earnings recovery, the report concluded.
