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FY25 GDP growth of 6.4% underwhelms, but are there silver linings?
- Business Standard |
- Economics (Indian Economy) |
- 2025-01-08
- Gross Value Added (GVA)
- Gross Domestic Production (GDP)
The National Statistics Office estimates India's real GDP growth to slow to 6.4% in FY25 from 8.2% in FY24, with nominal growth stable at 9.7%. The slowdown is attributed to supply-side factors, but stronger second-half growth is expected.
Economic Growth Overview
The National Statistics Office (NSO) released the first advance estimates for India's GDP growth, indicating a sharp slowdown to 6.4% in FY25 from 8.2% in FY24. Nominal GDP growth remains stable at 9.7%, slightly higher than FY24's 9.6%.
Fiscal Implications and Government Strategy
- The government aims to hit a fiscal deficit target of 4.9% of GDP, aided by buoyant revenue collections and weaker capital expenditure.
Supply and Demand-Side Metrics
- The Gross Value Added (GVA) metric, a supply-side estimate, is more reliable than the GDP measurement for India.
- Both GDP and GVA grew by 6.4% in FY25, lower than the economy's potential growth.
Historical Context and Growth Drivers
- Pre-Covid, GDP and GVA averaged 6.7% and 6.4% respectively from FY16 to FY20.
- New growth drivers include services exports and improved banking and corporate balance sheets, although government debt and household leverage have increased.
Current and Projected Performance
- Growth is expected to strengthen in H2 FY25 to 6.6% for GVA and 6.7% for GDP.
- NSO's estimates are based on data from the first eight months of FY25 and are subject to revision.
Sectoral Performance
- Stronger growth is anticipated in agriculture, with GVA growth accelerating to 4.5% in H2 from 2.7% in H1.
- Private final consumption expenditure is expected to grow by 7.3% in FY25, compared to 4% in FY24.
- The construction sector continues to show robust growth at 8.6%, outperforming pre-Covid levels.