India's FY25 GDP growth likely to remain in 6.4-6.8% range: Experts

Rural demand, services sector may lift H2 showing

Three weeks before the Union Budget for FY26, the National Statistics Office will release the first advance estimates of gross domestic product (GDP) for FY25 on January 7 amid a moderation in growth expectations.   Experts, however, say resilience in rural demand, along with sustained agricultural and services-sector output, will keep India on a growth path towards achieving 6.4-6.8 per cent expansion in FY25.   The Reserve Bank of India (RBI) has lowered the growth projection for this financial year to 6.6 per cent from an earlier estimate of 7.2 per cent.   The central bank’s Financial Stability Report said rural consumption, government expenditure, investment, and strong services exports were factors that would drive a pickup in growth in the third and fourth quarters of FY25.   The RBI’s projection follows a fall in India’s GDP growth to a seven-quarter low of 5.4 per cent in July-September as against its own projection of 7 per cent.   During the first half of FY25, real GDP growth (Y-o-Y) moderated to 6 per cent from 8.2 per cent in H1 and 8.1 per cent in H2 of 2023-24, respectively.   Weather-related disruptions, which played a dampener in growth in the first half, are showing signs of abating with improvement in kharif sowing. This is expected to have a positive impact on growth in the coming quarters.   “The realisation of normal kharif produce is comforting. Rabi sowing has started on a good note and that will offset weather-related disruption. Inflation is also on the decline, which will improve purchasing power to boost consumption,” said Vivek Kumar, economist, QuantEco Research. 

   QuantEco has projected a GDP growth rate of 6.5 per cent for FY25. Kumar said the projection took into account that H2, which carries a higher weighting than H1, will have a growth rate of around 6.8 per cent.   Several agencies and analysts have downgraded their growth expectations for the financial year. India’s growth forecast for 2024-25 was revised downward by Fitch Ratings to 6.4 per cent from its earlier estimate of 7 per cent. Goldman Sachs adjusted its forecast for the financial year to 6 per cent, down from 6.4 per cent.   Both these forecasts are lower than the finance ministry’s estimate of 6.5 per cent for FY25. The ministry in its monthly economic report said the growth outlook for October-December appeared bright, with rural demand remaining resilient and urban demand picking up in the first two months of the quarter.   The ministry said strong growth in sales of two- and three-wheelers and tractors in October and November pointed to resilient rural demand, while a robust pickup in air passenger traffic in the period indicated recovery in urban demand.   Deloitte India expects growth to be between 6.5 and 6.8 per cent, based on strong services-sector output and sustained agriculture performance.   Public expenditure, economists say, is expected to be better even if there is some shortfall in capex, driving better growth in the coming quarters.   “The government will likely keep pushing capex, which has been lagging this financial year. There will be effort at the Centre to revive spending over the remaining months of this financial year,” said Rumki Majumdar, economist, Deloitte India.