India's GDP Growth Likely to Hit Four-Year Low at 6.4%, Private Consumption Rebounds

India's gross domestic product (GDP) growth is estimated to be at 6.4 per cent in the fiscal year 2024-25 (FY25), said the Ministry of Statistics and Programme Implementation today. The estimated growth significantly dropped from 8.2 per cent growth in FY24 and will remain marginally lower than the Reserve Bank of India's (RBI) projection of 6.6 per cent.

"Real GDP has been estimated to grow by 6.4 per cent in FY 2024-25 as compared to the growth rate of 8.2 per cent in Provisional Estimate (PE) of GDP for FY 2023-24. Nominal GDP has witnessed a growth rate of 9.7 per cent in FY 2024-25 over the growth rate of 9.6 per cent in FY 2023-24," the Ministry stated in its official release.

According to government data, with 6.4 per cent it is likely to hit the lowest level in four years.

The announcement came weeks before the Union Budget 2025-26, to be tabled on February 1, 2025 by Finance Minister Nirmala Sitharaman.

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The government informed that the agriculture and allied sector has shown a significant improvement as the Real Gross Value Added (GVA) is estimated to grow by 3.8 per cent during 2024-25 as compared to the growth of 1.4 per cent in the last year.

The growth is also expected in construction as well as financial, real estate and professional services sectors, with Real GVA projected to rise by 8.6 per cent and 7.3 per cent respectively.

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Private final consumption expenditure (PFCE), a key indicator of domestic households, has witnessed a significant growth rate of 7.3 per cent during FY25. It was at 4 per cent during the pervious year.

Likewise, the Government Final Consumption Expenditure (GFCE) also rebounded to a growth rate of 4.1 per cent as compared to the growth rate of 2.5 per cent in the previous fiscal year. GFCE is the government spending on goods and services.

Growth Concerns

Amid India's slowing economy and subdued consumption, the RBI had lowered its growth projection to 6.6 per cent from earlier 7.2 per cent in its last Monetary Policy Committee meeting in December.

Meanwhile, the Finance Ministry in its latest Economic Review for November said that the combination of monetary policy stance and macroprudential measures by the RBI may have contributed to the demand slowdown in the first quarter of the FY25.

The RBI has been maintaining the repo rate at 6.5 per cent since February 2023, citing high food inflation in the country.

However, the Ministry also asserted there are good reasons to believe the outlook for growth in H2 of FY25 would be better.

Looking at the growth outlook for FY26, the Finance Ministry highlighted that fresh emerging global uncertainties may play into this. It said that the strength of the US dollar and a rethink on the path of policy rates in the United States have put emerging market currencies under pressure.