INDIA'S GDP GROWTH SLOWS: KEY INSIGHTS FROM THE FIRST ADVANCE ESTIMATE

The National Statistical Office (NSO), under the Union Ministry of Statistics and Programme Implementation, in the first week of January released the First Advance Estimates of GDP for the current fiscal, projecting India's real gross domestic product (GDP) growth at 6.4%, marking a deceleration compared to last year's 8.2%.

This slower growth is largely attributed to weaker investments, driven by a reduction in government capital expenditure (capex). However, this is not a bleak picture of the economy.

The sustained upward momentum in the Services Purchasing Managers' Index (PMI) reflects remarkable resilience and buoyancy across the entire services ecosystem, creating an ideal environment for businesses to expand, hire, and pursue growth with renewed confidence. It is expected to strengthen further, particularly with anticipated budget incentives likely to drive demand even higher.

Investment Slowdown and Consumption Revival

The FAE data suggests that while the economy faced weaker investment activity, private consumption is set for a rebound, especially in the second half of the fiscal year. GDP growth in the second half is expected to reach 6.8%, a slight improvement over the 6.0% recorded in the first half. Private consumption, in particular, is forecast to grow by 7.9% in the second half, boosted by rural demand, easing inflation, and seasonal tailwinds from festivals and weddings.

It must also be noted that investment growth is unlikely to recover in the near term. Gross fixed capital formation, a key measure of investments, is projected to grow at 6.4%, a marked drop from the previous year's 9.0%.

Nominal vs. Real GDP: Inflation's Role