NSO Projects 6.4% GDP Growth for India in FY 2024-25 amid Sectoral Challenges

January 8, 2025 Posted by India Briefing Reading Time: 3 minutes

India’s Gross Domestic Product (GDP) is projected to grow at 6.4 percent in FY 2024-25, as per the central government’s first advance estimates released by the National Statistical Office (NSO) on January 7, 2024. This figure is below the Reserve Bank of India’s (RBI) recent forecast of 6.6 percent for the fiscal year ending March 31, 2025.

NSO first advance estimates for FY 2024-25

According to the National Statistical Office (NSO), India’s real GDP growth for FY 2024-25 is expected to slow to 6.4 percent, compared to the 8.2 percent growth recorded in the provisional estimates for FY 2023-24. The dip in India’s GDP growth can be attributed to weaker performance in manufacturing and services.

Released on January 7, 2025, the economic data also indicates that real Gross Value Added (GVA) is set to increase by 6.4 percent in FY 2024-25, down from 7.2 percent in the previous fiscal year, while nominal GVA is projected to grow by 9.3 percent, slightly exceeding the 8.5 percent growth seen in FY 2023-24.

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GVA measures the total value of goods and services produced in an economy, industry, or sector, minus the cost of inputs and raw materials used in production. It represents the contribution of each sector to the economy. Whereas GDP is the total monetary value of all final goods and services produced within a country’s borders in a specific time period. It reflects the overall size and performance of an economy.

The NSO’s first advance GDP estimates could influence key priorities in the upcoming Union Budget, as it indicates a slowdown in economic activity. Finance minister Nirmala Sitharaman will present the federal budget outlay for FY 2025-26 on February 1, 2025.

The second advance estimates of annual GDP for FY 2024-25 along with quarterly GDP estimates for the quarter October-December of 2024-25 (Q3 2024-25) will be released by the NSO on February 28, 2025.

Sector-wise estimates show divergence in growth outlook

The latest economic projections reflect challenges following a weaker-than-anticipated performance in the second quarter of FY 2024-25, where growth dropped to 5.4 percent, surprising policymakers and analysts. This unexpected slowdown led the RBI to revise its FY 2024-25 growth forecast from 7.2 percent to 6.6 percent.

Sectoral estimates for FY 2024-25 present a mixed picture. The agriculture and allied sectors are expected to rebound with a growth rate of 3.8 percent, a significant improvement from the 1.4 percent seen in FY 2023-24. The construction sector and the financial, real estate, and professional services sectors are projected to grow robustly at 8.6 percent and 7.3 percent, respectively.

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In contrast, manufacturing is forecast to slow considerably, with growth declining to 5.3 percent from 9.9 percent in the previous fiscal. Similarly, the services sector, encompassing trade, hotels, transport, and communication, is anticipated to grow at 5.8 percent, lower than the 6.4 percent recorded in FY 2023-24.

Consumption trends and fiscal policy challenges

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Private Final Consumption Expenditure (PFCE) at constant prices is projected to rise by 7.3 percent in FY 2024-25, a definite improvement from the 4 percent recorded in the previous year. Similarly, Government Final Consumption Expenditure (GFCE) is expected to recover with a growth rate of 4.1 percent, compared to 2.5 percent observed in FY 2023-24.

PFCE is a key economic indicator that measures the total expenditure by households and non-profit institutions on goods and services for consumption in the Indian economy. It accounts for the largest component of India’s GDP by expenditure, reflecting the spending behavior of individuals and households, which drives domestic demand.

GFCE refers to the total spending by the government on goods and services intended for direct consumption to meet the collective and individual needs of citizens.

Key takeaway

The first advance estimates from the NSO highlight the delicate balance policymakers in India must strike as they craft the fiscal strategy for FY 2024-25. Ensuring the country’s fiscal stability while promoting economic recovery remains a key challenge amid slowing growth.

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