January 7, 2025
Improved agricultural output and industrial activity, alongside resilient rural demand, are expected to drive growth in the second half of FY25
Real GVA in agriculture is projected to rise to 3.8% in FY25 from 1.4% in FY24, reflecting a recovery in the sector
The construction sector is forecasted to grow by 8.6%, while the financial and professional services sector will likely expand by 7.3%
Private consumption growth surged to 7.3% in FY25, underlining stronger consumer confidence and economic recovery
The Ministry of Statistics has maintained India’s GDP growth estimate for FY25 at 6.4%, a marked reduction from the robust 8.2% growth achieved in FY24. This projection highlights a cautious yet optimistic outlook for the country, underpinned by expectations of improved agricultural and industrial activity in the latter half of the year.
Real GDP for FY25 is forecasted to grow by 6.4%, with nominal GDP growth pegged at 9.7%. The ministry cited resilient rural demand and a recovery in key sectors as critical drivers for achieving a 6.4–6.8% expansion by March 2025.
The agriculture and allied sector has emerged as a significant contributor, with real GVA growth projected to reach 3.8% in FY25 compared to 1.4% in FY24. Meanwhile, the construction sector is anticipated to grow by 8.6%, buoyed by increased infrastructure development. Similarly, the financial, real estate, and professional services sector is expected to expand by 7.3%, underscoring strong performances in business and real estate activities.
Private consumption has seen a significant boost, with Private Final Consumption Expenditure (PFCE) growing by 7.3% in FY25, up from 4% in the previous fiscal year. This uptick reflects improving consumer confidence and spending power, a vital component of domestic demand recovery. Government spending has also rebounded, with Government Final Consumption Expenditure (GFCE) rising by 4.1% compared to 2.5% in FY24.
Despite these positive indicators, the Reserve Bank of India (RBI) recently revised its FY25 GDP projection downward to 6.6% from an earlier estimate of 7.2%. This adjustment came after India’s GDP growth in Q2 FY25 fell to a seven-quarter low of 5.4%, driven by slower growth in preceding quarters and persistent inflation, which reached 5.8% in November 2024—above the central bank’s target of 4%.
The RBI, however, remains optimistic about the second half of FY25, attributing potential recovery to rural consumption, government expenditure, strong services exports, and sustained investment. Projections for Q3 and Q4 stand at 6.8% and 7.2%, respectively, indicating an expected resurgence.
This announcement comes just weeks ahead of the Union Budget for FY26, with economic stakeholders closely monitoring fiscal measures to support sustained growth amidst global uncertainties. The government’s efforts to enhance infrastructure and strong private sector participation are expected to stabilise the growth trajectory further.
Source: Business Standard