India's economic growth projections for the fiscal year 2024-25 reveal a significant slowdown, leading to concerns among policymakers and economic analysts alike. According to the National Statistics Office (NSO), the country's real Gross Domestic Product (GDP) is anticipated to rise by 6.4% in FY25, down from 8.2% recorded for the previous fiscal year, 2023-24. This deceleration reflects broader economic challenges as growth has already slowed to 6% during the first half of the current fiscal year.
The NSO's first advance estimates indicate noticeable variations across sectors. While the overall GDP growth is projected at 6.4%, the real Gross Value Added (GVA) for the Indian economy is expected to mirror this at 6.4%, compared to 7.2% achieved last year. Notably, the agriculture sector is predicted to experience the most significant growth, with GVA rising to 3.8% from last year's 1.4%, showcasing resilience against economic headwinds.
Other sectors are showing mixed signals. The only improvements forecasted apart from agriculture are within Public Administration, Defence, and Other Services, which are expected to see their GVA growth surge to 9.1% from 7.8% previously. Conversely, the manufacturing sector is projected to face challenges, with GVA growth anticipated to nearly halve from 9.9% last year to just 5.3% this year, highlighting potential vulnerabilities within industrial output.
Meanwhile, the Construction sector is expected to maintain strong performance with GVA growth pegged at 8.6%, albeit down from the previous year's 9.9%. The Trade, Hotels, Communication, and Services related to Broadcasting sector are also set to grow, but by only 5.8%, slightly lower than the 6.4% recorded last year.
On the expenditure front, private final consumption expenditure is forecasted to expand by 7.3%, up from 4% last year. This increase signifies consumer confidence and spending, providing some optimism amid broader economic uncertainty. Government expenditure, on the other hand, is anticipated to witness some growth, rising by 4.1%, which also indicates a positive stance on public spending to support economic activity.
“Real GDP or GDP at Constant Prices is estimated to attain a level of ₹184.88 lakh crore in the financial year 2024-25, against the Provisional Estimate of GDP for the year 2023-24 of ₹173.82 lakh crore,” the NSO stated. This figure marks the government’s projections about the economy, ensuring there are realistic expectations about fiscal health and growth potential.
The NSO’s estimates also caution observers to keep in mind potential revisions as improved data coverage may lead to adjustments. These revisions are considered standard and necessary as economic data often evolves, providing more accurate insights over time. The upcoming release of the Second Advance Estimates of Annual GDP for FY 2024-25 is scheduled for February 28, 2025, which will bring new insights about quarterly performance for the third quarter.
Compounding these concerns is the recent data indicating India's GDP growth slipped to a seven-quarter low of 5.4% during the July to September 2024 quarter. This prompted the Reserve Bank of India to revise its growth forecast for the full year downward, now estimating 6.6%, reduced from earlier expectations of 7.2%. The Finance Ministry has echoed this sentiment by reframing its growth expectations for FY25 to around 6.5%, down from earlier estimates of between 6.5% and 7%.
These oscillations prompt significant discussion about the upcoming Union Budget for 2025-26, expected to be framed with these projections as guiding estimates. The government will need to devise strategic interventions to stimulate growth and bolster economic momentum, especially as the growth rate has lingered at what could be considered four-year lows.
With such dynamics in play, stakeholders are calling for careful consideration of policy adjustments aimed at reviving buoyancy within the Indian economy. How effectively the Union Budget tackles these projections will be pivotal for setting the course of India’s economic narrative as it moves forward. The mitigation of growth challenges will not only depend on internal economic factors but also on global economic conditions and external trade relations.