Revival in rural demand, increased infrastructure spending is likely to drive India's growth in current year, even as increasing debt and trade protectionism could pose a challenge, said a Deloitte report.
The 'Voice of Asia' report of Deloitte predicts a faster than expected growth for Indian economy against the backdrop of increasing crude oil prices and volatile market conditions.
"The improvement in domestic conditions is a positive sign that growth is picking up and will continue to maintain strong momentum in 2018, retaining India's position as the 'fastest growing large economy' in the world," a statement said.
Showing signs of recovery, the Indian economy recorded a five-quarter high growth of 7.2 per cent in the October-December period on good showing by key sectors like agriculture, construction and manufacturing.
The economy is expected to grow at 6.6 per cent in the current fiscal ending March 31, as per official estimates, compared to 7.1 per cent in 2016-17.
"After a year of disruptions and growth slowdown, Indian economy is consolidating the gains from the recent reforms and is moving in the right direction. With a steady increase in FDI inflows and pick-up in growth in the Q3 of 2017, 2018 will expectedly remain a period of strong growth for India with a growth rate of around 6.8 - 6.9 per cent," Deloitte India Partner and Lead Economist Anis Chakravarty said.
The report said that the negative effect of major reforms like GST and demonetisation is wearing off now as there is high optimism in domestic demand in the form of consumption and revival in small scale business activities, resulting in an increase in FDI flows into the country.
Moreover, the government has made huge strides towards financial inclusion and pushing the expansion of digital India. India is steadily moving towards greater formalisation of the informal economy, it added.
The report said that with eye on infrastructure development, the government has given green light to an Rs 7 trillion infrastructure program in late 2017, with the aim to pave more than 80,000 km of road by March 2022.
The report further said that global economic growth is likely to move up further as more than 75 per cent of the world economy is now enjoying an upswing, with forecasts anticipating global growth to rise to 3.6 per cent in 2017 and 3.7 per cent in 2018, from 3.2 per cent in 2016.
"As the global economy is in its heights after recovering from the shocks of 2008 crisis, India should take the benefit of this opportunity. India's ability to stave off the economic gales was helped by the fact that it is much less dependent than most countries on global flows of trade and capital. And therefore, the recovery in global economic conditions should help India boost its domestic growth," it added.
With regard to challenges facing the Asian region, the report said there is a build-up of debt from the post-2008 financial crisis period of excess global liquidity. Besides, the spread of global protectionist sentiment is a concern for the Asian economies, it said.