India’s economy to grow at slowest pace in 4 years; manufacturing faces sharpest decline

The Indian economy is estimated to grow 6.4% in 2024-25 against 8.2% in the previous fiscal year, the National Statistical Office (NSO) said on Tuesday, January 7, 2025, in its first advance estimates of national accounts.

The projection is the lowest since the pandemic and lower than the recent Reserve Bank estimate of 6.6% for the current fiscal year ending March 2025, amid a general slowdown in consumer spending.

The nominal GDP has shown a slightly higher growth rate of 9.7% for FY 2024-25, above the 9.6% growth observed in FY 2023-24.

Releasing the first advance estimates of national income for 2024-25, the NSO said, “real GDP has been estimated to grow by 6.4% in FY2024-25 as compared to the growth rate of 8.2% in the Provisional Estimate (PE) of GDP for FY2023-24”.

The real Gross Value Added (GVA) has grown by 6.4% in FY 2024-25, down from the 7.2% growth in the previous fiscal year. In nominal terms, GVA growth has increased to 9.3% from 8.5% in FY 2023-24.

“Real GDP or GDP at Constant Prices is estimated to attain a level of ₹184.88 lakh crore in the financial year 2024-25, against the Provisional Estimate of GDP for the year 2023-24 of ₹173.82 lakh crore. The growth rate in Real GDP during 2024-25 is estimated at 6.4% as compared to 8.2% in 2023-24. Nominal GDP or GDP at Current Prices is estimated to attain a level of ₹324.11 lakh crore in the year 2024-25, against ₹295.36 lakh crore in 2023-24, showing a growth rate of 9.7%,” the govt release said.

Among sectors, the real GVA for Agriculture and allied sectors is estimated to grow significantly by 3.8% in FY 2024-25, compared to a modest 1.4% growth in FY 2023-24. The construction sector is projected to see a strong real GVA growth of 8.6% in FY 2024-25. The Financial, Real Estate & Professional Services is also expected to perform well, with an estimated real GVA growth of 7.3% in the same period.

At constant prices, the Private Final Consumption Expenditure (PFCE) has seen a growth rate of 7.3% during FY 2024-25, up from 4.0% in the previous fiscal year.

The Government Final Consumption Expenditure (GFCE) at constant prices has rebounded with a growth rate of 4.1%, compared to a 2.5% growth in FY 2023-24.

Spending by households and businesses makes up about 60% of India’s GDP. Owing to the general elections, the government’s budgeted expenditure also undershot this year, further crimping growth. The Street expects the economy to stay under pressure in the coming weeks with the Trump administration set to take over with the stated goal of proposed tariffs.

All these will add to the pressure on new RBI Governor Sanjay Malhotra to cut interest rates. Under his predecessor, Shaktikanta Das, the RBI kept interest rates unchanged for almost two years despite growing calls, including from within the government, to ease.

The RBI’s first monetary policy decision this year is scheduled for February 7, a week after Finance Minister Nirmala Sitharaman presents the Union Budget on February 1.

With inputs from agencies