GDP growth likely to slip to four-year in FY25, per govt data

India's economic growth rate is estimated to slip to a four-year low of 6.4 per cent in 2024–25, mainly on account of a poor showing in the manufacturing and services sectors, according to government data released on Tuesday, 7 January.

The gross domestic product (GDP) rate of 6.4 per cent will be the lowest since the Covid year (2020–21), when the country witnessed a negative growth of -5.8 per cent. It was 9.7 per cent in 2021–22; 7 per cent in 2022–23; and 8.2 per cent in the last fiscal ended March 2024.

The first advance estimates of national income for 2024–25 released by the National Statistics Office (NSO) is lower than the 6.6 per cent projected by the Reserve Bank in December 2024. It is also a tad lower than the finance ministry's initial projection of 6.5–7 per cent.

The advance estimates will be used in preparing the union budget to be presented by finance minister Nirmala Sitharaman in the Lok Sabha on 1 February.

The economic growth slowed to a seven-quarter low of 5.4 per cent during the July–September 2024 period. It was 6.7 per cent in the first quarter (April–June).

The manufacturing sector’s output is expected to decelerate to 5.3 per cent from a high of 9.9 per cent recorded in the previous fiscal, the NSO said.

The services sector, comprising trade, hotels, transport and communications, is estimated to expand at only 5.8 per cent, as against 6.4 per cent in 2023–24.

On the other hand, the farm sector is estimated to record a growth of 3.8 per cent in the current fiscal, up from 1.4 per cent in 2023–24.

'Real GDP has been estimated to grow by 6.4 per cent in FY 2024–25 as compared to the growth rate of 8.2 per cent in the provisional estimate (PE) of GDP for FY 2023–24,’ the NSO said.

Nominal GDP is likely to grow at 9.7 per cent in 2024–25, against 9.6 per cent in 2023–24. According to the data, nominal GDP (the GDP at current prices) is estimated to attain a level of Rs 324.11 lakh crore in 2024–25, compared to Rs 295.36 lakh crore in 2023–24.

The size of the economy, as per the current estimates, is USD 3.8 trillion (@ Rs 85.7 per USD) for 2024–25.

Aditi Nayar, chief economist, ICRA, opined that while the NSO’s implicit H2 FY2025 projections seem reasonable, some of the sectoral numbers could report higher growth prints.

"In our view, the GDP growth in FY2026 will be crucially influenced by global uncertainties as well as domestic uncertainties, amidst considerable base effects. Benefitting from an anticipated capex push in the upcoming Budget, we project the GDP growth at 6.5 per cent in FY2026," she said.

Dharmakirti Joshi, chief economist, CRISIL, said the decline in government capital expenditure — a key driver of post-pandemic recovery — during the second quarter is unlikely to be compensated for in the rest of the fiscal.

"The urban economy is grappling with the dual challenge of high inflation and slowing credit growth. The Reserve Bank of India's recent data indicates consumer confidence has moderated in urban areas, while growth in retail credit, which has a larger footprint in the urban economy, has slowed," he said.

Further, per the NSO, the nominal gross value added (GVA) is estimated to attain a level of Rs 292.64 lakh crore in 2024–25, against Rs 267.62 lakh crore in 2023–24, showing a growth rate of 9.3 per cent.

Private final consumption expenditure (PFCE) at constant prices has witnessed a growth rate of 7.3 per cent during 2024–25, over the growth rate of 4 per cent in the previous financial year.

The government final consumption expenditure (GFCE) at constant prices has rebounded to a growth rate of 4.1 per cent, compared to the growth rate of 2.5 per cent in the previous fiscal.

The NSO also said the per capita income (at current prices) is estimated to have increased by 8.7 per cent to Rs 2,00,162 per annum. It was Rs 1,84,205 in the preceding fiscal.