India’s Real Gross Domestic Product (GDP) growth for the financial year 2024-25 is expected to slow to 6.4%, according to the first advance estimates released by the National Statistics Office (NSO) on Tuesday.
The advance estimates, based on extrapolated data from the first seven to eight months of FY25, provide an early indication of the economic performance for the year. These estimates are crucial for assisting the Union Ministry of Finance and other government departments in framing the Union Budget for the next financial year, which will be presented in Parliament on February 1.
This growth rate is the lowest in four years and falls short of projections made by both the Reserve Bank of India (RBI) and the government, which had estimated growth rates of 6.6% and 6.5-7%, respectively.
Slower Growth in Key Sectors
The estimated GDP growth for FY25 represents a slowdown from 7.2% in FY24. Gross Value Added (GVA) growth, which reflects national income from output, is projected to grow at 6.4% in FY25, down from 7.2% in FY24. In nominal terms, GDP is expected to grow by 9.7%, slightly higher than the 9.6% growth in FY24.
Despite an expected acceleration in growth during the second half of FY25, the overall growth estimate is tempered by weaker performance in the first half. According to calculations based on the first advance estimates, India’s economy is projected to grow at 6.7% in the second half (October-March), compared to a growth of 6.0% in the first half (April-September).
Sectoral Performance
There is a notable slowdown in both the primary and secondary sectors, with the exception of agriculture. Manufacturing GVA growth is expected to decline to 5.3% in FY25, a sharp drop from 9.9% in FY24. Similarly, growth in mining and quarrying is projected to slow to 2.9% from 7.1% in the previous year.
However, the agriculture and allied sectors are expected to perform better, with GVA growth estimated at 3.8%, up from 1.4% in FY24. The services sector is forecast to grow at 7.2%, slightly lower than the 7.6% growth in FY24, with public administration, defence, and other services leading the sector with an estimated growth of 9.1%.
Other services, including trade, hotels, transport, communication, and broadcasting, are projected to grow at a slower pace of 5.8%, compared to 6.4% in FY24. Growth in financial, real estate, and professional services is also expected to slow to 7.3%, down from 8.4% last year.
Consumption and Investment Trends
Private Final Consumption Expenditure (PFCE), an indicator of consumption demand, is expected to rise by 7.3% in FY25, a significant increase from 4.0% in FY24. In contrast, investment growth remains subdued, with Gross Fixed Capital Formation (GFCF) projected to grow by 6.4%, down from 9.0% in FY24.
Government expenditure is expected to provide support to overall economic growth, with Government Final Consumption Expenditure (GFCE) estimated to increase by 4.1%, compared to a more modest 2.5% growth in the previous financial year.
Economists’ Views
Economists attribute the slowdown to a cyclical phase in the Indian economy.
Paras Jasrai, Senior Economic Analyst at India Ratings and Research, noted that “the lower GDP growth reflects a combination of factors, including the strong base effect, the impact of the general elections, weak private sector capital expenditure, and the effects of monetary and fiscal tightening over the past three quarters.”
With the overall economic growth forecast lower than previous projections, attention will now turn to the measures included in the upcoming Union Budget, which will play a crucial role in shaping the economic trajectory for the next financial year.
Also Read: Amit Shah Launches Bharatpol Portal to Strengthen India’s International Law Enforcement Cooperation
