Growth engine loses steam

AT 6.4% IN FY25, IT WILL BE A 4-YEAR LOW: FIRST ADVANCE ESTIMATES

- PRIYANSH VERMA

INDIA'S GROSS DOMESTIC product (GDP) is set to slow down considerably to register a growth rate of 6.4% in 2024-25 compared with 8.2% in 2023-24, the National Statistics Office (NSO) said on Tuesday, releasing the first advance estimates. The slowdown is on account of a decline in annual rates of expansion across manufacturing, mining and services sectors.

However, the year-on-year growth rate, a four-year low, is also caused in good measure by statistical factors - "net taxes on products" are seen to grow just 5.9% in FY25, compared with a steep 19.1% last fiscal.

The growth in gross value added (GVA) in 2024-25 is seen at 6.4%, the same as GDP; at 7.2%, GVA growth was much lower than the headline growth number in 2023-24.

The NSO's growth estimate for the current fiscal, computed via extrapolation of last year's estimates, and in the light of indicators and data sources up to December, is lower than the Reserve Bank of India's latest projection of 6.6%, and 6.5% forecast by the finance ministry in the monthly economic report for November.

A 6.4% growth in FY25 would require 6.7% economic expansion in the second half of the year, compared with 6% in the first half. It also implies that the average growth in the six years to 2024-25 (from the pre-pandemic period to the present) will be just 4.93%.

THAT REPRESENTS A loss of 6.4% growth over the period, against an average annual growth of 6%.

The NSO has estimated nominal GDP expansion for the current year at 9.7%, against 10.5% projected in the Union Budget 2024-25. This means fiscal deficit would be marginally higher than the estimated level of 4.94% of the GDP, if other Budget numbers hold, or require an expenditure reduction of ₹13,000 crore given the budgeted level of receipts.