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NEW DELHI: India’s economy is estimated to slow to a four-year low in 2024-25 due to moderation in manufacturing and sluggish investment, while robust growth in the farm sector is expected to provide some support and help boost rural consumption.
The first advance estimates for the current financial year, released by the National Statistics Office (NSO) on Tuesday, showed gross domestic product (GDP) is estimated to grow by 6.4%, sharply lower than the 8.2% recorded in 2023-24.
The growth rate is a shade lower than Reserve Bank of India’s (RBI) downwardly revised projection of 6.6% for 2024-25; it’s also lower than estimates of several agencies, including the govt’s, which have pegged it in the 6.5%-7% range. The 6.4% growth projection is the lowest since the Covid-19 pandemic and comes on the back of a slowdown in overall investment and consumption in urban areas.
The slowdown was expected given the deceleration in the July-Sept quarter when growth slowed to a seven-quarter low of 5.4%, triggering calls for a rate cut by the central bank.
A recent finance ministry report had said that a combination of monetary policy stance and macroprudential measures by the central bank, and structural factors, could have led to the slowdown and all eyes are now on the Feb 1 Budget for measures to revive demand and push growth against the backdrop of global uncertainty and geopolitical tensions.
There are also expectations of a rate cut by RBI in the Feb policy meeting.
Tuesday’s data showed manufacturing growth is estimated to slow to 5.3% in 2024-25 from 9.9% in the previous year, while services sector is estimated to expand at 7.2% in 2024-25 compared to 7.6% in the previous year.
The farm sector remains a bright spot and is projected to expand 3.8% this year compared to 1.8% in the previous year. The construction sector has also remained healthy at 8.6% compared to 9.4% in the previous year.
The data estimated private final consumption expenditure (PFCE) at constant prices to grow 7.3% during this fiscal year, over the 4% rise last year. PFCE is the total amount of money spent by households and non-profit entities that serve households on the final consumption of goods and services.
NSO said the advance estimates of GDP are indicator based and compiled using the benchmark-indicator method – the estimates available for the previous financial year (2023-24) are extrapolated using the relevant indicators reflecting the performance of sectors.
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