Deloitte India: Key Economic Insights and Recommendations
1. Increased Global Trade Volatility and Indian Export Targets
Deloitte India has raised concerns over rising global trade volatility, particularly following the U.S. elections, which could significantly impact India's export landscape.
As India strives to achieve its ambitious $2 trillion export target by 2030, these global uncertainties pose potential challenges.
To mitigate risks and boost export competitiveness, Deloitte emphasizes the need for:
- Tariff Rationalization: Adjusting tariffs to align with global trade standards and reduce input costs for exporters.
- Duty Exemptions: Expanding exemptions on critical raw materials and intermediate goods to lower production costs.
- Simpler Compliance: Streamlining regulatory processes and reducing bureaucratic hurdles to make it easier for businesses to engage in export activities.
The Indian government is expected to address these areas through policy measures aimed at enhancing the ease of doing business for exporters, thus making Indian products more competitive in the global market.
2. Infrastructure Investment: A Pillar of Economic Growth
Infrastructure investment continues to be a cornerstone of India’s economic growth strategy. Spending in this sector has grown substantially, increasing from 1.63% of GDP in FY2019 to an anticipated 3.4% in FY2025. Deloitte forecasts sustained investments in:
- Transportation: Building and upgrading roads, highways, and logistics parks to improve connectivity and reduce freight costs.
- Digital Infrastructure: Expanding broadband access and creating smart city solutions to drive innovation and digital inclusion.
- Social Infrastructure: Investments in health, education, and skill development programs to enhance human capital and long-term productivity.
These efforts align with India’s vision of achieving "Viksit Bharat" (Developed India) by 2047, emphasizing inclusive and sustainable growth.
3. Inflation: A Persistent Economic Challenge
Deloitte highlights inflation, particularly food inflation, as a critical challenge for India’s economy. The Economic Survey 2024 suggests re-evaluating the inflation targeting framework to exclude food prices, which are predominantly supply-driven and less influenced by monetary policy. Key recommendations include:
- Supply-Side Interventions: Enhancing agricultural productivity, improving storage and logistics, and stabilizing supply chains to control food price volatility.
- Excluding Food Prices from RBI Targets: Allowing the Reserve Bank of India (RBI) to focus on broader demand-side inflation without being constrained by fluctuating food prices.
The government is expected to adopt a dual approach:
- Long-Term Measures: Strengthening the agricultural value chain through structural reforms, incentivizing production, and reducing inefficiencies in delivery systems.
- Short-Term Relief: Implementing Direct Benefit Transfers (DBTs) and food coupons to support rural households and stimulate rural demand, which has been adversely affected by higher rural inflation.
4. Budget 2025-26: Focus Areas and Expectations
Deloitte anticipates that the upcoming Union Budget will address these challenges through targeted initiatives, including:
- Agricultural Reforms: Incentivizing farmers to adopt modern techniques and technology to boost production efficiency.
- Rural Support: Expanding rural welfare programs and providing financial support to mitigate the impact of inflation.
- Logistics and Supply Chain Optimization: Reducing delivery costs by modernizing infrastructure and promoting private sector participation in supply chain management.
- Skill Development Programs: Strengthening initiatives in education and training to ensure the workforce is equipped to meet future demands.
Outlook and Conclusion
As India navigates global uncertainties, sustained infrastructure investment, robust export policies, and targeted inflation management will be pivotal in achieving its growth ambitions. By addressing these challenges through a mix of short-term and long-term measures, the government can bolster economic resilience, support consumption, and lay the foundation for a prosperous future.
India’s journey toward "Viksit Bharat" by 2047 depends on its ability to adapt to changing dynamics while fostering inclusive growth and innovation.
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