India’s GDP Growth Forecast for FY25

January 9, 2025

India’s Real Gross Domestic Product (GDP) growth is projected to reach a four-year low of 6.4 per cent for the financial year 2024-25. This estimate, released by the National Statistics Office (NSO), reflects challenges in industrial and investment sectors. The prediction falls short of the Reserve Bank of India’s growth estimate of 6.6 per cent and the government’s range of 6.5-7 per cent as outlined in the Economic Survey 2023-24. The first advance estimates are derived from data collected during the initial months of FY25 and aim to assist in the formulation of the upcoming Union Budget.

About GDP Growth Estimates

GDP growth estimates are crucial for economic planning. The NSO releases advance estimates to guide government departments in budget preparation. The current estimate indicates a slowdown influenced by various factors, including weak industrial performance and investment growth.

Key Contributors to Economic Slowdown

Several factors contribute to the anticipated GDP slowdown. These include a strong base effect from previous years, the impact of general elections, subdued private sector capital expenditure, and tightening monetary and fiscal policies. Analysts believe these elements have collectively led to the cyclical slowdown observed in the economy.

Sectoral Growth

The first advance estimates reveal a marked slowdown in the primary and secondary sectors, excluding agriculture. Manufacturing Gross Value Added (GVA) is expected to decline to 5.3 per cent from 9.9 per cent in the previous year. Mining and quarrying growth is projected at 2.9 per cent, lower than the 7.1 per cent recorded in FY24.

Consumption and Investment Trends

Consumption demand is expected to rise by 7.3 per cent, up from 4 per cent last year. However, investment growth is forecasted at 6.4 per cent, a decline from the previous year’s 9 per cent. This disparity marks the challenges in stimulating corporate investments despite improved consumption.

Performance of the Services Sector

The services sector is anticipated to perform relatively well, with growth estimated at 7.2 per cent compared to 7.6 per cent in FY24. Public administration, defence, and other services are projected to grow by 9.1 per cent, showcasing resilience in this sector amidst broader economic challenges.

Government Expenditure Impact

Government Final Consumption Expenditure (GFCE) is set to increase by 4.1 per cent, up from 2.5 per cent in the previous year. This rise in government spending is expected to support overall economic growth, despite the subdued investment climate.

GVA reflects national income derived from production.
The base effect refers to the impact of previous year’s growth on current performance.
Fiscal deficit is the difference between government expenditure and revenue.
The Reserve Bank of India regulates monetary policy in India.
Advance estimates are preliminary figures released before final data.

Future Economic Outlook

Looking ahead, private consumption is projected to increase in the second half of FY25, driven by rural demand due to strong agricultural output. However, investment growth may remain stagnant, indicating ongoing challenges in stimulating economic activity. Urban demand has weakened, influenced by slower wage growth, suggesting a need for targeted economic strategies.

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