Economic Growth Projections for India
The First Advance Estimates (FAE) for the fiscal year 2024-25 indicate a real GDP growth of 6.4% and a nominal GDP growth of 9.7%. This is slightly below the Reserve Bank of India's (RBI) revised estimates and the Union Budget projections.
Comparison with Previous Estimates
- The RBI’s revised growth estimates were 6.6% for real GDP and 10.5% for nominal GDP.
- The growth for the first half of 2024-25 is expected to be 6%, improving to 6.7% in the second half.
- The 2023-24 growth was notably higher at 8.2% for GDP and 7.2% for Gross Value Added (GVA).
Sectoral Analysis
- Manufacturing sector growth fell sharply from 9.9% in 2023-24 to 5.3% in 2024-25.
- The Gross Fixed Capital Formation rate has stabilized around 33.4% during 2021-22 to 2024-25.
Investment and Government Expenditure
- Investment growth is crucial, with government investment slowing down significantly at (-)12.3% eight months into 2024-25.
- The Government of India’s capital expenditure in the first eight months was 46.2% of the budget target, reaching ₹5.14 lakh crore.
- There is a need to accelerate capital expenditure growth to at least 20% for 2025-26.
Future Growth Prospects
- India's real GDP growth is projected to stabilize at 6.5% over the next five years, according to the International Monetary Fund (IMF).
- Nominal GDP growth is anticipated in the range of 10.5%-11% with an implicit price deflator (IPD)-based inflation of about 4%.
- Achieving a developed country status would require sustained real GDP growth of 6.5% with nominal growth of 10.5%-11% over the long run.
Challenges
Maintaining a growth rate of 6.5% may be challenging as the economic base expands. Early years will require higher growth rates, but the potential growth rate remains at 6.5%.
The article concludes by emphasizing that a 6.4% growth rate in 2024-25, while below the previous year, aligns with India's potential growth rate.