India GDP: FY25 Growth Forecast At 6.4%, Lowest In Four Years; Nominal GDP Expansion At 9.7%

The Indian economy is estimated to grow at the slowest pace in four years as per the government's first advance estimates.

The gross domestic product is estimated to grow 6.4% in the fiscal 2024-25, 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% for fiscal 2024.

A Bloomberg poll of economists had estimated the country's GDP to rise 6.4% in the current fiscal. GDP growth is projected at 6.6% by the Reserve Bank of India, revised from 7.2% the central bank had earlier projected.

Gross value added, which strips out indirect tax and subsidies, is expected to rise 6.4% as compared with a growth of 7.2% in the previous fiscal.

Nominal GDP, which will be used as the base for the upcoming budget, is estimated to rise by 9.7%, as against a gain of 9.6% in fiscal 2024.

GDP grew at 5.4% in the second quarter of the ongoing fiscal—the lowest pace in seven quarters, led by slower growth across the industrial sector. This was compared to 6.7% in the preceding quarter. The lower-than-expected growth has tempered estimates for the full year, despite expectations of a bounce back expected in the second half of the fiscal.

Given the expectations of a large miss in the capex target, the government's fiscal deficit print is likely to trail the FY25 RBE, which would largely offset the lower-than-budgeted nominal GDP print, said Aditi Nayar, chief economist at ICRA. "Consequently, we expect the fiscal deficit to GDP ratio to only marginally trail the budget estimate of 4.9% for the fiscal," Nayar said.

GDP Estimates: Key Sectoral Trends

• Agriculture and allied sectors are estimated to grow by 3.8% during 2024-25 as compared to the growth of 1.4% witnessed during the last year.

• The mining sector is estimated to grow by 2.9% in FY25, as compared with 7.1% in the previous fiscal.

• Manufacturing sector growth is estimated at 5.3%, after growing by 9.9% in the previous fiscal.

• The construction sector and financial, real estate, and professional services sectors are estimated to grow by 8.6% and 7.3%, respectively.

• Trade, hotel, transport, and communication are estimated to rise by 5.8% in comparison with a growth of 6.4% last fiscal.

• The financial services, real estate, and professional services sectors are likely to grow by 8.9%, as compared with a growth of 7.1% in the previous financial year.

• The public administration segment, supported by government spending, is seen at 9.1%, as compared with a growth of 7.8% in FY24.

Expenditure Trends

• Private final consumption expenditure, reflecting consumer spending, is seen rising by 7.3% in FY25.

• Growth in government final consumption expenditure is pegged at 4.1%.

• Gross fixed capital formation, which reflects private investment, is estimated to rise by 6.4%.