Govt targets 6.5-7% GDP growth in FY25 despite slowdown: EAS Ajay Seth

India's GDP recorded a 5.4% growth in the July-September quarter, its slowest in two years

The Indian government is taking steps to achieve its projected gross domestic product (GDP) growth target of 6.5 to 7 per cent for financial year 2024-25 (FY25), despite a sharper-than-expected slowdown in the second quarter (Q2), Economic Affairs Secretary Ajay Seth said on Monday, according to a report by Reuters. The government anticipates an acceleration in economic growth during the latter half of the year.

 

Economic growth slows to two-year low

India’s GDP recorded a 5.4 per cent growth in the July-September quarter, the slowest in two years, due to subdued performance in manufacturing and mining. This marked a significant decline from the 8.1 per cent recorded in the same period last year and fell short of the 6.5 per cent projection for the quarter.

 

Earlier, Chief Economic Advisor V Anantha Nageswaran, addressing the lower-than-expected figure, described the results as “disappointing but not alarming”, adding that the overall FY25 growth target remains achievable. He noted, however, that global economic challenges, particularly those impacting domestic manufacturing, continue to pose risks. 

 

Manufacturing PMI slows in November

The manufacturing sector also faced setbacks, with the Purchasing Managers’ Index (PMI) slipping to 56.5 in November, its lowest in 11 months, according to an S&P Global survey. The survey cited fierce competition, rising input costs, and price pressures, particularly for commodities such as chemicals, cotton, and rubber, as key factors dampening growth.

 

Despite rising domestic steel consumption, production has not kept pace, partly due to the impact of dumping affecting local manufacturers. 

 

India’s manufacturing sector is also grappling with rising input costs, with inflation reaching its highest level since July in the third quarter. While inflation remains below long-term averages, significant price hikes have been observed in sectors such as chemicals, leather, and cotton.

 

The global economic slowdown has further exacerbated domestic challenges, especially in export-driven industries.

 

FY25 growth projections revised

Following the surprising Q2 slowdown, several agencies have reduced their GDP growth forecasts for FY25. While the Reserve Bank of India (RBI) had initially projected 7.2 per cent growth, the finance ministry has revised expectations to 6.5 per cent to 7 per cent.

 

Economic growth for the first half of FY25 stood at 6 per cent, and the government is relying on improved performance in the latter half to meet its annual targets. However, the RBI’s Monetary Policy Committee (MPC) is likely to revise its projections in its policy review on December 6.

 

Despite the slowdown, India continues to hold its position as the fastest-growing major economy, Nageswaran said. The government remains optimistic about achieving its FY25 targets, banking on a stronger second half of the financial year.