India to grow 7.2% this fisc, rising oil prices challenge: Deloitte

India's economic growth will accelerate to 7.2 per cent in the current fiscal buoyed by manufacturing activity even as rising oil prices and high government debt remain a challenge, Deloitte said today.

The agriculture sector is expected to grow higher than the estimated 2.1 per cent in the current fiscal year on account of positive prospects on Rabi harvest and a normal monsoon, contributing significantly to the national GDP, said the India Economic Outlook Report 2018.y.

"India's growth prospects remain promising and the economy will continue to grow at 7.2 per cent in 2018-19. The gradual recovery in industrial production (IIP) bodes well for the economy, reflecting a possible strengthening of domestic demand and a further build-up in global trade activity," it said.

The Indian economy grew 6.6 per cent in the last fiscal as it battled the lingering effects of demonetisation in 2016.

Deloitte's growth forecast for this fiscal is conservative compared to that of the Reserve Bank and the International Monetary Fund (IMF) which projected India to grow 7.4 per cent, and Asian Development Bank and Fitch which estimated growth at 7.3 per cent.

However, the report cautions that the increasing inflationary pressures, widening fiscal deficit and the rising debt burden could pose challenges to the economy.

"With the indicators of industrial production, investment demand, auto sales and exports showing recovery, India's growth outlook remains promising and is expected to strengthen further in the next few quarters," Deloitte Touche Tohmatsu India Lead Economist and Partner Anis Chakravarty said.

Also reviving consumer demand and attracting more private investment remains the key to maintaining India's growth momentum and accelerate it further, he added.

The report further said that while current data on inflation has been reassuring, risks remain tilted to the upside given expectations of higher crude oil prices in addition to further hardening of domestic consumption, and risks of a higher fiscal deficit.