Yet, India will retain its position as the fastest-growing large economy, CRISIL said in a release.
The fiscal impulse will be lesser because of the need to reduce the fiscal deficit to 5.1 per cent of GDP next fiscal, according to the glide path presaged. However, the nature of government spending will provide some support to the investment cycle and rural incomes.
Inflation softened this fiscal due to easing input costs and slower domestic demand. CRISIL expects the softening to continue in the next fiscal on the back of healthier agriculture output that tames food inflation, and benign oil and commodity prices.
Growth momentum will continue through this decade, piggybacking significant private investments in emerging sectors, continuing government spending on infrastructure buildout, ongoing reforms push and efficiency gains from increasing digitalisation and physical connectivity, CRISIL noted.
“The next seven fiscals will see the Indian economy cross the $5 trillion mark and close in on $7 trillion at an estimated 6.7 per cent average annual growth. By fiscal 2031, India will be the No. 3 economy and an upper middle-income country, which will be a big positive for domestic consumption,” Amish Mehta, managing director and chief executive officer of CRISIL, said.
“India’s manufacturing sector is at a sweet spot due to high capacity utilisation across key sectors, opportunities from global supply-chain diversification, thrust on infrastructure investment, the green-transition imperative and strong balance sheets of lenders. Continuous reforms, enhanced global competitiveness and moving up the value chain will boost the share of manufacturing in India’s GDP beyond the projected 20 per cent in fiscal 2031,” he added.
CRISIL’s analysis shows industrial capital expenditure will rise to ₹6.5 lakh crore (~$78.58 billion) annually on average between fiscals 2024 and 2028 from ₹3.9 lakh crore (~$47.146 billion) in the preceding five fiscals.
There will be near- and medium-term challenges posed by geopolitical uncertainties, global indebtedness, uneven economic recovery, climate change and technological disruptions. However, growth will take support from domestic structural factors and cyclical levers, CRISIL added.
Overall, there is a deserved sense of optimism about India given its resilience and enormous growth opportunities.
Fibre2Fashion News Desk (DS)