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.