India’s economic outlook has been saved
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India’s economic outlook
January 2025
A focus on the resilience in Indian capital markets.
An unexpected slowdown in the first half of the fiscal year has prompted Deloitte India to revise its annual GDP growth projection to be 6.5 percent and 6.8 percent in FY 2024-25 and between 6.7 percent and 7.3 percent in the following year. Election uncertainties in the first quarter, followed by a modest pickup in construction and manufacturing activities in the subsequent quarter due to weather-related disruptions, weighed on growth this fiscal year.
Our latest outlook report focuses on a compelling story of capital market resilience amid uncertainties. Between October and December, Foreign Institutional Investors (FIIs) withdrew significant amounts as a reaction to geopolitical uncertainties surrounding the US elections and outcome, slower corporate earnings and China's stimulus measures in September 2024. These outflows were comparable to those during the COVID-19 pandemic. Yet, the Sensex remained relatively stable (compared to previous episodes of FII outflows and volatility), thanks to the rising participation of Domestic Institutional Investors (DIIs), which bolstered market stability.
The government recognises the rising importance of retail investors, and we expect that it will use the upcoming Union Budget 2025–26 as an opportunity to focus on strengthening this participation and channelising household savings into alternate financial investment options, in addition to capex spending, advancing skilling initiatives and accelerating digitisation.
India’s capital markets have become more resilient against Foreign Institutional Investment (FII) volatilities since 2020.