Deloitte optimistic on India's growth but cautions on inflation

Deloitte said the manufacturing sector remained robust, rising 8.6% on a three-month moving average in Feb, against 9.1% in Jan

Deloitte has projected India’s economy to grow by 7.2 per cent in 2018-19, on the back of gradual recovery in industrial production and in agriculture  due to a normal monsoon. 

The economy was officially projected to have grown 6.6 per cent in FY18, in the second advance estimate. 

In its India Economic Outlook Report 2018, the consultancy firm, however, cautioned that increasing inflationary pressure, a widening fiscal deficit and rising debt could pose challenges. 

Deloitte said the manufacturing sector remained robust, rising 8.6 per cent on a three-month moving average in February, against 9.1 per cent in January. This reflected  rising consumption demand, as suggested by an upswing in vehicle sales, cement and diesel. 

It said exports, despite  some deceleration in recent months, saw an overall healthy growth at 9.9 per cent for 2017-18, as compared to a rise of 5.2 per cent the previous year. Non-oil and non-gold import showed considerable strength over the better part of the year, growing at a double-digit pace. It was 19.1 per cent for FY18, against an increase of merely 1.6 per cent the previous year. 

The uptick in import could also be a result of restocking. If this growth is sustained, it could  indicate resilience of domestic demand and growing consumer demand, it said. 

Deloitte said the RBI has maintained a neutral stand since last August keeping rates unchanged, citing concerns on inflation and spill-over risks from global policy changes, particularly the US Fed rate normalisation. 

Even now, the outlook on monetary policy decisions continue to remain data-dependent.