India likely to grow at slower clip of 6.4%, say First Advance Estimates for FY25

India's economy is forecast to expand by a lower-than-expected 6.4% in FY25, the slowest in four years, with tepid manufacturing and lower investments pulling down growth, according to data released by the National Statistical Office (NSO) on Tuesday.

Economists said the government should take measures in the February 1 budget to spur growth, following the sharp deceleration from the robust 8.2% expansion in gross domestic product (GDP) in FY24.

The first advance estimates for GDP pegged FY25 growth below the Reserve Bank of India's (RBI) projection of 6.6%. The central bank will face greater pressure to cut rates to boost growth, economists said. The RBI Monetary Policy Committee meets next on February 5-7.


The World Bank and International Monetary Fund (IMF) have projected the Indian economy to grow by 7%.

Need to Spur Investment: Economists
In nominal terms, without adjusting for inflation, GDP is expected to rise by 9.7%, almost unchanged from the 9.6% in the year before, but lower than the 10.5% growth assumed by the government in last year's budget.

The advance estimates will be used in preparation of the budget, to be presented by finance minister Nirmala Sitharaman.

"The budget has to do something to spur investment and consumption, and its own ability is through capital expenditure," said Bank of Baroda chief economist Madan Sabnavis. "PLI is a very good scheme, which should be continued, to boost investment."

HDFC Bank principal economist Sakshi Gupta said, "Given the GDP growth slowdown and rising global headwinds, budget will need to balance fiscal consolidation strategy with counter-cyclical fiscal support."

The economy grew by 6% in the first half of the ongoing fiscal. The government estimate of ₹184.9 lakh crore real GDP in FY25 indicates a slightly better 6.7% rise in the second half. These numbers are likely to undergo revisions as "improved data coverage and revision in input data made by source agencies would have a bearing on subsequent revisions of these estimates," read the NSO's statement.

Per capita GDP is expected to rise 5.4% to ₹1,31,310 in 2024-25, lower than 7.2% growth in the year before. In nominal terms, it is likely to grow by 8.7%, compared to 8.6% in the same period.

"Per capita nominal GDP is expected to increase significantly in FY25, by Rs 35,000 more than FY23, despite a slowdown in real GDP growth and nominal GDP growth remaining almost stagnant," said Soumya Kanti Ghosh, group chief economic advisor at State Bank of India.

Consumption vs Investment
Consumption appears to be a bright spot, but private investment is a worry, economists noted.

Private final consumption expenditure, which has about 60% share in GDP, is expected to rise 7.3% in FY25, sharply higher than 4% in the year before.