Economy: India’s GDP may grow 6.4% in FY25, says first advance estimates
Virendra Pandit
New Delhi: As Finance Minister Nirmala Sitharaman gives the finishing touches to the next fiscal year’s Union Budget (2025-26), to be tabled in Parliament in the coming Budget Session, the first economic survey for FY25 has projected a GDP growth of 6.4 percent in the current financial year, ending March 31, 2025.
Earlier, it had projected a GDP growth of 6.5 percent to 7 percent, which the Finance Ministry revised to 6.5 percent in November 2024.
The GDP estimates for FY25, the Union Ministry of Statistics and Program Implementation said on Tuesday, has been maintained at 6.4 percent, which is significantly lower than the 8.2 percent growth witnessed in FY24, the media reported.
Despite a dull first half of FY25 (April-September 2024), the ministry expected an uptick in agricultural and industrial activity, along with resilient rural demand in the second half (October 2024-March 2025) to keep India on a growth path towards achieving 6.4-6.8 percent expansion by the end of the financial year.
“Real GDP has been estimated to grow by 6.4 percent in FY25 as compared to the growth rate of 8.2 percent in Provisional Estimate (PE) of GDP for FY24. Nominal GDP has witnessed a growth rate of 9.7 percent in FY25 over the growth rate of 9.6 percent in FY24,” the ministry said in an official release.
Importantly, the farming and allied sector has shown a significant improvement, with real Gross Value Added (GVA) growth estimated at 3.8 percent in FY25, a marked increase from the previous year’s 1.4 percent. GVA is a measure of the value that producers add to goods and services. It is the difference between the value of a producer’s income and their costs.
The construction sector’s real GVA is projected to rise by 8.6 percent. Likewise, the financial, real estate, and professional services sectors are expected to grow by 7.3 percent, indicating a strong performance in finance, real estate development, and business services.
As for expenditure patterns, Private Final Consumption Expenditure (PFCE) at constant prices has experienced a growth of 7.3 percent in FY25, a significant increase compared to the 4 percent growth in the previous financial year.
PFCE is a key indicator of domestic consumption, reflecting the spending behavior of households. It highlights an improvement in consumer confidence, spending power, and overall economic recovery.
Similarly, government final consumption expenditure (GFCE), which refers to government spending on goods and services, has rebounded strongly with a growth rate of 4.1 percent in FY25, up from 2.5 percent in FY24.
The Economic Survey report, released in July 2024, projected a growth of 6.5 to 7 percent for FY25. In its November review, the finance ministry revised its GDP projections to around 6.5 percent, flagging the Reserve Bank of India’s monetary policy stance among the reasons for the slowdown in H1 of FY25.
In its last monetary policy committee meeting, the central bank significantly lowered its growth projection for FY25 to 6.6 percent from an earlier estimate of 7.2 percent, after India’s GDP for the second quarter (Q2) fell to a seven-quarter low of 5.4 percent against the projection of 7 percent. It also marked the third consecutive quarter of slower growth in India. Also, at 5.8 percent, inflation in November 2024 was above the RBI’s target of 4 percent.
The RBI, however, contended that rural consumption, government expenditure, investment, and strong services exports would lead to a pickup in GDP in the third and fourth quarters of this financial year.
