FMCG, renewables, auto sectors to do well in future, says Rumki Majumdar of Deloitte

Although first three-quarters’ growth was not too promising with 6.2 percent in Dec quarter – it was somewhat expected since it was an election year, explains Dr Rumki Majumdar (PhD), economist at Deloitte.

She speaks about the current volatility in the financial market and deconstructs to explain what it reflects on the fundamentals of economy. She is optimistic about the long-term prospects of India’s growth. She also explains the reasons for which she thinks that FMCG, renewables, auto, defence and semiconductors are likely to do well in the near future.

Edited Excerpts:

India’s economy grew at 6.2 percent in Q3 FY25. Do you think this is good growth to meet long term target of government?

Growth in the first three quarters has been, on average, 6.1 per cent year-on-year—a slowdown which is somewhat expected given that this year has been the election year. Besides uncertainties around the US elections, higher than normal yet spatial rainfall, and geopolitical events have pressured trade and investments.

By the way, though growth may seem to be slowing, the higher base effect (as growth was revised up to 9.2 percent in FY24) is causing the current numbers to appear modest.

There are times when growth and markets do not tally with each other but in the long run they are supposed to go together. What are your views on the current scenario?

The current turmoil in the market is an outcome of global uncertainties and disruption to trade and investment prospects. The turmoil is not a reflection of India’s economic fundamentals, which remain strong. Global uncertainties always weigh on investors’ sentiments, leading to a capital flight to safer investment destinations. If you look at the corporate profits, they did well in the third quarter.

Several high-frequency data such as GST, FMCG growth, IP, and inflation numbers point to a rebounding economy. Once investors factor in the uncertainties in their decision-making, India will emerge as an attractive destination for its strong domestic demand, large consumer base, and robust manufacturing capabilities and services sector performance.

Financial markets are currently down around 16 percent from their peaks. What is your future outlook of the market in view of the country’s overall market growth?

The market for the next few months will remain volatile as the trade landscape continues to evolve, impacting the global supply chain, global growth, and inflation. If the US sees higher inflation, the US Fed may go for fewer rate cuts, which again will impact global liquidity and investment appetite.

Having said that, India’s long-term prospects are very strong. Besides, the government is proactively engaging in bold reforms and initiatives to support growth and cushion the impact of trade uncertainties.

Once the uncertainty dust settles and we know where trade policies in the West are headed, our market will attract investments, and our outlook will improve.

How is the Indian economy doing in comparison to other economies?

India is the fastest-growing economy amid uncertainties, and the recent drop in inflation numbers assures that the growth comes with more stability as well. CAD (current account deficit) is the lowest in a decade, and our fiscal deficit is down from 9.2% of GDP during COVID-19 year to 4.8% this FY. Clearly, we have improved our economic fundamentals steadily. That said, there is scope to improve. We need to adhere to fiscal consolidation and reduce deficit as well as keep inflation under check.

Our biggest advantage is the demographic dividend and growing middle class. 40 per cent of NSE investors in the Indian stock market are under 30 years old, highlighting the confidence Indian youth have in Indian capital markets.

In the Budget, income tax rates were reduced and a lot of emphasis was made on job creation. Do you think enough is being done on job creation?

On the employment front, job creation will have to be shouldered primarily by the private sector. While capex spending and a boost to consumption can spur employment, it will be the private sector, which needs to step up and invest, which can lead to employment generation.

Moreover, with technology-driven job creation, the government’s role will be to build an upskilling infrastructure, guaranteeing workforce readiness and inclusive technology adoption. This will ensure that technology’s benefits reach all levels of the job value chain.

Which are the sectors that are likely to do well in the near and medium-term future?

In the short run, a boost in consumption will likely help the FMCG (fast-moving consumer goods) sector. The auto sector will also do well, particularly at the entry and mid-segment levels. 

In the longer run, the renewables sector is being massively pushed, and demand for energy is on the rise due to rising demand for mobility and technology. India’s commitment to reducing its carbon footprint will be another factor.

We also believe defence and semiconductors will see huge investment inflows due to global developments as the government will prioritise self-reliance in critical sectors. Rising digitisation demand and the rising opportunity for the servicification of manufacturing will push growth in the services sector, which is where India has a comparative advantage.

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