GDP growth seen hitting 4-year low in FY25

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January 07, 2025

GDP growth seen hitting 4-year low in FY25

India's Gross Domestic Product (GDP) is projected to grow at 6.4% in the fiscal year 2024-25, marking a four-year low and a sharp decline from the 8.2% growth recorded in FY24, according to first advance estimates released by the government on Tuesday.The projection is lower than the recent Reserve Bank estimate of 6.6 per cent for the current fiscal year ending March 2025. Releasing the first advance estimates of national income for 2024-25, the NSO said, "real GDP has been estimated to grow by 6.4 per cent in FY2024-25 as compared to the growth rate of 8.2 per cent in Provisional Estimate (PE) of GDP for FY2023-24".The data also revealed that real Gross Value Added (GVA) is expected to expand by 6.4% in FY25, down from 7.2% in FY24. In contrast, nominal GVA is projected to grow at 9.3% in FY25, slightly higher than the 8.5% growth in the previous fiscal year.The advance GDP estimate plays a crucial role in framing the Union Budget and indicates a slowdown in economic activity. This projection follows a sharp dip in growth during the July-September quarter of FY24, which stood at 5.4%, surprising analysts and policymakers alike. The unexpected slowdown in the second quarter prompted the Reserve Bank of India (RBI) to revise its growth forecast for FY24. The RBI lowered its estimate to 6.6%, down from the earlier projection of 7.2%.Sectoral bifurcation The government data showed that agriculture and allied sector is estimated to grow by 3.8% during FY25 as compared to the growth of 1.4% witnessed during the last year, i.e., FY24.Meanwhile, real GVA of construction sector and financial, real estate & professional services sector has been estimated to observe growth rates of 8.6% and 7.3%, respectively during the FY25.Private Final Consumption Expenditure (PFCE) at constant prices, is expected to witness a growth rate of 7.3% during FY25 over the growth rate of 4.0% in the previous financial year, said the government release. "Government Final Consumption Expenditure (GFCE) at constant prices, has rebounded to a growth rate of 4.1% as compared to the growth rate of 2.5% in the previous financial year," it further added.The figures point to a challenging economic landscape as the government prepares its fiscal roadmap for FY25. With slowing GDP growth, maintaining fiscal stability while supporting economic recovery will be a delicate balancing act for policymakers.