India FY25 GDP: Risks To The Downside, Say Economists

The Indian economy is estimated to grow at the slowest pace in four years as per the government's first advance estimates. While the second half of the fiscal is expected to see some bounce back, economists believe that downside risks to the full year forecasts remain.

GDP and GVA is estimated to grow 6.4% in fiscal 2025, according to the first advance estimates released by the Central Statistics Office ahead of the Union budget. This is compared to a provisional estimate of 8.2% and 7.2% in FY24. Nominal GDP, which will be used as the base for the upcoming budget, is estimated to rise by 9.7%, compared to 9.6% in fiscal 2024. The government had budgeted nominal GDP growth at 10.5% for the ongoing fiscal.

While, the NSO's estimates imply that the second-half of the fiscal will see steady growth at about 6.8%, after the tepid print of 6% in the first half. However, H2FY25 may face downward pressure, implying a downside risk to the advance estimates of 6.4%, amid weaker participation of private economic agents, cautioned Madhavi Arora, lead economist at Emkay.

"Considering the advance estimates are based on partial data, and with the economy in a slowdown phase, we expect a downward revision in FY25 GDP growth from 6.4% is closer to our forecast of 6% year-on-year," Nomura Economists Sonal Varma and Aurodeep Nandi said in a research note on Wednesday. Growth has been a mixed bag during the festive season of October-November, especially for consumption, industrial and investment growth has been mostly tepid, and early data for December does not suggest a strong rebound thus far, they explained. 

"We believe India is in the midst of a cyclical growth slowdown, led by headwinds from fading urban pent-up demand, tight monetary policy, household balance sheet stress, slowing nominal income growth and a negative credit impulse," they added.

While GDP growth is expected to improve to 6.7% and 7.0% respectively in Q3 and Q4, driven by higher agricultural growth and a pickup in public capital expenditure, a sustained domestic demand revival, will be the key to 7%+ growth over the medium term, said Suman Chowdhury, Chief Economist and Executive Director, Acuité Ratings & Research.

A range of economic and strategic risk prevails post the imposition of the tariff polices by the incoming US President Trump, stated a research note by Jahnavi Prabhakar, economist at Bank of Baroda. This could have a far reaching impact on global trade, with any retaliatory measures pushing towards the possibility of a tariff war. This remains a global risk and will adversely impact the global economies.

While the Indian economy remains resilient on the back of the strong festive demand and steady improvement in economic activity, some downside risk to these estimations emerge due to global headwinds, especially the threat of tariff war, Prabhakar said. Economists at the Bank of Baroda estimate nominal GDP at 10.5%, and real GDP at 6.8% for FY26, higher than the government's first advance estimates.