GDP Growth Forecast For FY25 Slashed To 6.4 Per Cent, Slowest In Four Years Amid Weak Manufacturing And Sluggish Investments

India is set to record an annual growth rate of 6.4 per cent for the fiscal year 2024-2025 (FY25), the slowest in four years and below the government’s initial projection of 6.5 to 7 per cent. 

The downward revision, announced by the National Statistics Office (NSO), Tuesday (7 January) reflects weak manufacturing performance and reduced corporate investments.

Last month, the Reserve Bank of India (RBI) lowered its growth forecast to 6.6 per cent, down from 7.2 per cent, after India reported a disappointing GDP growth of 5.4 per cent in the July-September quarter—its slowest in seven quarters.

Key Economic Indicators

1. Private Consumption

Private consumption, which constitutes 58 per cent of GDP, is expected to grow 7.3 per cent year-on-year, compared to 4 per cent in the previous fiscal year.

However, private investments are projected to rise by only 6.4 per cent, down from 9 per cent in the prior year.

2. Government Spending

Government spending is estimated to increase by 4.1 per cent, up from 2.5 per cent in 2023-24.

3. Nominal Growth

In nominal terms, the economy is expected to grow by 9.7 per cent, below the 10.5 per cent estimate from the February 2024 federal budget.

Sectoral Performance

Agriculture: Farm output is projected to grow by 3.8 per cent, up from 1.4 per cent last year, aided by a strong monsoon.

Manufacturing: Growth in the manufacturing sector is forecasted at 5.3 per cent, a sharp decline from 9.9 per cent in 2023-24.

Construction: Construction output is expected to rise by 8.6 per cent, slightly lower than the previous year’s 9.9 per cent.

The Indian economy faces multiple hurdles, including high inflation, sluggish capital flows, and a record trade deficit. These factors, coupled with a weaker manufacturing sector, have raised concerns about the sustainability of growth in the near term.

Economic revival in the second half of the fiscal year, with growth projected at 6.7 per cent, is expected to provide some relief, said Aditi Nayar, chief economist at rating agency ICRA.

However, the government’s ability to balance spending while driving private and public investment will be critical for long-term economic stability.