NEW DELHI: India’s GDP is projected to expand at 6.4 per cent – the slowest pace in four years – as the country’s growth is expected to lose momentum in FY25.
A sluggish manufacturing sector and tepid corporate investments weigh on expansion, according to the Economic Survey 2024-25.
The slowdown marks a sharp deceleration from the 8.2 per cent growth recorded in FY24.
For FY26, the survey forecasts India’s GDP growth in the range of 6.3-6.8 per cent, signaling continued economic moderation.
To achieve its long-term goal of becoming a developed nation by 2047, India needs to sustain an average growth rate of 8 per cent at constant prices over the next couple of decades, the report, prepared by the Chief Economic Advisor to the Finance Ministry, noted.
While domestic fundamentals remain strong, external factors – including geopolitical tensions and varying monetary policy trajectories across economies – pose risks to India’s growth outlook.
Inflationary pressures have eased globally, but concerns persist over supply chain disruptions arising from geopolitical hotspots such as the Middle East and the ongoing Russia-Ukraine conflict.
Investment outlook and policy challenges
The survey highlights that investment activity is expected to pick up, supported by higher public capital expenditure and improving business expectations. Manufacturing capacity utilisation remains above the long-term average, and private sector order books have shown steady growth.
However, excess global capacity in sectors like steel could dampen investment momentum due to increased trade competition.
Despite being the world’s fastest-growing major economy, recent India’s GDP growth trajectory has sparked concerns.
The economy slowed to a seven-quarter low of 5.4 per cent in Q2 FY25, down from 8.1 per cent in the same period last year and 6.7 per cent in the previous quarter. High inflation, declining wages, and cautious corporate spending have dampened consumer sentiment, raising questions about the sustainability of India’s post-pandemic rebound.
Growth target vs reality
Prime Minister Narendra Modi’s vision of making India a developed economy by 2047 hinges on maintaining growth closer to 8 per cent.
However, most economists believe sustaining such levels will be challenging. The International Monetary Fund (IMF) projects India’s GDP growth at 6.5 per cent over the next few years, while the World Bank estimates 6.7 per cent. Goldman Sachs expects 6 per cent growth in the current fiscal and 6.3 per cent in FY26.
In the decade before the pandemic, India maintained an average growth rate of 7 per cent – a level the Reserve Bank of India (RBI) considers the economy’s potential growth rate.
While the country remains a global outperformer, maintaining robust growth in the face of evolving economic challenges will require a calibrated policy approach focused on investment revival and structural reforms.
