Government estimates GDP growth rate at 6.4% in FY 25, lowest in last four years

By: Team India Tracker

In the fiscal year 2024–2025, real GDP, or GDP at constant prices, is projected to reach ₹184.88 lakh crore, compared to the provisional estimate of GDP for 2023–2024 of ₹173.82 lakh crore.

According to the First Advance Estimates of GDP released by the National Statistics Office (NSO), in FY25, the Indian economy is predicted to grow at a four-year low of 6.4 percent, falling short of the 6.6 percent the Reserve Bank of India (RBI) had predicted. 

Compared to the 8.2 percent growth rate in the Provisional Estimate (PE) of GDP for FY 2023-24, real GDP is predicted to expand by 6.4 percent in FY 2024-25. The nominal GDP grew at a pace of 9.7 percent in FY 2024–2025 compared to 9.6 percent in FY 2023–2024. Compared to FY 2023-24's growth rate of 7.2 percent, real GVA increased by 6.4 percent in FY 2024-25. In FY 2024-25, nominal GVA grew at a pace of 9.3 percent, whereas in FY 2023-24, it grew at a rate of 8.5 percent. According to estimates, the real GVA of the agriculture and related sectors will increase by 3.8 percent in 2024–2025 as opposed to 1.4 percent in 2023–2024. The real GVA of Mining and Quarrying and Manufacturing is estimated to sharply decline from 7.1 percent to 2.9 percent and from 9.9 percent to 5.3 percent respectively. 

Source: Ministry of Statistics & Programme Implementation

In the fiscal year 2024–2025, real GDP, or GDP at constant prices, is projected to reach ₹184.88 lakh crore, compared to the provisional estimate of GDP for 2023–2024 of ₹173.82 lakh crore. Real GDP growth is predicted to be 6.4 percent in 2024–2025 compared to 8.2 percent in 2023–2024. In 2024–2025, nominal GDP, or GDP at current prices, is projected to reach ₹324.11 lakh crore, up from ₹295.36 lakh crore in 2023–2024, indicating a 9.7 percent growth rate. Compared to the PE for 2023–24, which was ₹158.74 lakh crore, the real GVA is projected to reach ₹168.91 lakh crore in 2024–25, representing a growth rate of 6.4 percent as opposed to 7.2 percent in 2023–24. 

Source: Ministry of Statistics & Programme Implementation

Sakshi Gupta, principal economist at HDFC Bank said, “Some improvement in consumer demand, combined with a rise in government spending, is likely to support growth in the second half of  FY25. The inflation rate for December is expected to print above 5 per cent because seasonal moderation in vegetable prices was not enough to offset the large build-up in prices seen over the past few months. Moreover, global uncertainties, along with the incoming Trump presidency, have put depreciation pressure on the rupee. The United States (US) Fed is also likely to stay on hold in its upcoming January meeting, which could further raise US yields and further pressure the rupee. Given the global backdrop, elevated inflation prints, combined with some signs of recovery in economic activity in H2 FY25, the RBI can tilt on the side of caution and wait for further confirmation that inflation is moderating before cutting rates.” 

The advance GDP estimate, which shows a decline in economic activity, is essential for formulating the Union Budget. This forecast comes after growth fell precipitously to 5.4 percent in the July–September quarter of FY24, shocking both analysts and decision-makers.

Paras Jasrai, senior analyst, India Ratings and Research said, "The decline in GFCF growth to 6.4 percent in FY25 reflects the subdued investment demand in the economy. Government capex which was the lifting factor in revival of investment demand post COVID appears to have tempered off largely due to general elections and focus on fiscal consolidation. While household investments which are mostly in the real estate sector have been steady in FY25, private investment has been muted.” 

Every year at the end of the first week of January, the First Advance Estimates are presented. These are merely preliminary growth projections for that fiscal year. The Second Advance Estimates and Provisional Estimates will be released by the Ministry of Statistics and Program Implementation (MoSPI) by the end of February and May, respectively. The FAEs hold significant importance being the final GDP figures issued before the Union Budget for the coming fiscal year, which is presented on February 1. 

Though the First Advance Estimates indicate that the GDP growth rate could fall to a four year low of 6.4 percent, the trends in the past have shown that the GDP growth rate is usually revised up from the FAEs. For example, the final figures reported in February 2024 showed growth of 9.7 percent in FY22, 0.5 percentage points higher than the initial advance estimate of 9.2 percent. Similarly, the final figure decreased the size of the contraction to 5.8 percent, whereas the initial advance estimate showed a 7.7 percent contraction due to COVID.