The National Statistics Office (NSO) has shared its first estimate for India’s economy in 2024-25, and the outlook isn’t as good as expected.
Growth is predicted to be just 6.4% this year, which is a sharp drop from last year’s 8.2% and the lowest growth in four years.
The economy struggled in the first quarter due to election-related spending, which limited government investments.
In the second quarter, weak demand and still-low public investment held the economy back, bringing the growth rate down to 5.4%. This is the slowest growth rate in over a year and a half.
The government and the Reserve Bank of India (RBI) had originally expected the economy to grow at over 7%, but they’ve now lowered their expectations to about 6.5%.
They hope growth will pick up in the second half of the year, reaching around 7% to make up for the slower start.
The NSO’s forecast shows that agriculture is likely to grow faster than last year, but sectors like manufacturing and mining are expected to grow much more slowly.
While the services sector is in a slightly better position, there are still worries about its growth slowing down.
Data from the second and third quarters show weaker growth in both manufacturing and services.
As for private spending, it’s expected to rise by 7.3%, a big improvement from last year’s 4%. However, the third-quarter trends suggest that urban demand is still weak, so this estimate might be too optimistic.
The Finance Ministry has linked the slowdown in spending to factors like the Reserve Bank’s monetary policies and other economic measures.
Slow wage growth is also hurting household spending. The NSO’s forecast shows a decline in private investment growth, which is expected to fall to 6.4% this year from 9% last year.
This suggests that businesses are holding off on investment because of weak demand, both in India and globally, and the government might not meet its public investment goals.
These early projections are used to help plan the Union Budget for the next year, but many economists believe the estimates might be too hopeful.
Some think the economy will end up growing around 6%, with little improvement in the second half of the year.
With global uncertainties also affecting growth, it looks like India’s economy will face a tough time ahead.
The future of the economy will depend on the decisions made by policymakers.
The 2025-26 Union Budget will need to focus on meaningful reforms and policy changes to bring growth back to 7% or even 8%. Simply relying on interest rate cuts won’t be enough to fix the situation.
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