Informist Poll
India's GDP growth seen at 4-year low of 6.4% in FY25
This story was originally published at 15:02 IST on 3 January 2025
Register to read our real-time news.Informist, Friday, Jan. 3, 2025
By Shubham Rana
NEW DELHI – India's GDP growth may moderate to a four-year low in the current financial year ending March, with a sharp slowdown in economic activity in the second half of 2024 seen dragging the full-year growth figure down to its lowest level since the contraction witnessed in pandemic-hit FY21.
According to an Informist poll of 11 economists, India's GDP is expected to grow 6.4% in FY25. After shrinking 5.8% in FY21, the Indian economy has grown by at least 7% in each of the subsequent three financial years. In FY24, growth beat all forecasts to come in at 8.2%.
The Ministry of Statistics and Programme Implementation will release its first advance estimate of GDP for FY25 on Tuesday at 1600 IST. The first advance estimate is a key number for the government as it will form the basis for its FY26 Budget numbers.
The finance ministry will use the first advance estimate of FY25 GDP in current prices to assume a certain nominal GDP growth for FY26, which will then form the basis for the various Budget numbers for next year, including the fiscal deficit target and growth in tax collections.
Finance Minister Nirmala Sitharaman will present the Union Budget on Feb. 1.
Should the first advance estimate of GDP growth come in at 6.4%, it would be lower than the latest projections of the Reserve Bank of India as well as the finance ministry. Last month, the central bank lowered its growth forecast for FY25 by 60 basis points to 6.6%, while the finance ministry last week said it sees growth around 6.5% as against 6.5-7.0% it had said in the FY24 Economic Survey.
The downward revision to the growth forecasts came after data released on Nov. 29 showed the Indian economy expanded by just 5.4% in Jul-Sept--the lowest in seven quarters and sharply lower than all expectations.
The RBI, the government, and other economists expect growth to rebound from a disappointing 6.0% in the first half of FY25, with Rahul Bajoria, head of India economic research at BofA Securities India, saying that Oct-Mar should see a pick-up in government spending, an improvement in rural growth, and an end to tightening of credit conditions. According to Bajoria, high-frequency indicators suggest a minor improvement in growth prospects compared to Apr-Sept, but the extent of recovery seems "uncertain for now."
The RBI's official forecast pegs Oct-Dec GDP growth at 6.8% and 7.2% for Jan-Mar. However, the central bank's staff wrote in their monthly State of the Economy article last month that Jan-Mar growth may only be 6.5%.
Other economists expect growth in the third quarter of FY25 to have missed the RBI's forecast by an even larger margin. "Our in-house models suggest that economic growth improved slightly in Oct-Nov, compared to Jul-Sept. At the same time, HFIs (high-frequency indicators) portray a mixed picture for December. Accordingly, we believe that India's real GDP growth could improve to 5.5-5.7% in Oct-Dec versus 5.4% in Jul-Sept, much lower than the RBI's forecast of 6.8%," economists from Motilal Oswal Financial Services said in a note Thursday.
The following table details the GDP growth estimates of economists:
|
ORGANISATION |
GDP GROWTH ESTIMATE |
|
Nomura |
6.0% |
|
DBS Bank |
6.3% |
|
ICICI Bank |
6.3% |
|
IDFC FIRST Bank |
6.3% |
|
Societe Generale |
6.3% |
|
Acuite Ratings and Research |
6.4% |
|
India Ratings and Research |
6.4% |
|
Bank of America Securities |
6.5% |
|
ICICI Securities Primary Dealership |
6.5% |
|
ICRA |
6.5% |
|
Bank of Baroda |
6.6-6.8% |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Ashish Shirke
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