GUWAHATI: India's real Gross Domestic Product (GDP) growth for the financial year 2025-26 is projected to be between 6.3 and 6.8 per cent, according to the Economic Survey 2024-25. The forecast suggests a continued period of relatively slow economic growth.
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The report, prepared by the Chief Economic Advisor to the Finance Ministry, stated that to achieve its ambition of becoming a developed nation (Viksit Bharat) by the centenary of independence, India needs to achieve an average growth rate of around 8 per cent at constant prices for the next decade or two. The survey acknowledged the influence of the global political and economic environment on India's growth prospects.
The survey noted that global inflationary pressures are easing, but risks of synchronised price increases remain due to potential geopolitical disruptions, such as tensions in the Middle East and the ongoing Russia-Ukraine conflict. "Central banks have adopted more accommodative monetary policies. However, the pace of rate cuts varies across regions depending on the growth imperatives and the pace of disinflation, creating potential divergences in economic recovery."
A weaker manufacturing sector and slower corporate investments are expected to dampen India's growth to 6.4% in 2024-25, which would be the slowest pace in four years, a sharp decline from the growth recorded in FY24. India's GDP grew by an impressive 8.2 per cent during the financial year 2023-24, and continued to be the fastest-growing major economy. The economy grew by 7.2 per cent in 2022-23 and 8.7 per cent in 2021-22.
"Capacity utilisation in manufacturing remains above the long-term average, and private sector order books have shown steady growth, alongside a rise in investment intentions," as per the eco survey. However, these gains could be "tempered" by global excess capacities in sectors such as steel, leading to aggressive trade policies in search of demand, the survey cautioned.
Concerns about India’s economic performance have been growing, with growth slowing to a seven-quarter low of 5.4% in the second quarter of FY25, down from 8.1% in the same period last year and 6.7% in the previous quarter. Business spending has slowed, consumers have cut back due to high inflation and declining wages, while corporate profits have been impacted. The slowdown raises questions about whether the post-pandemic boom was simply a short-term rebound in pent-up demand.
The slower growth rate presents challenges for the Modi government following last year’s elections. Prime Minister Modi's goal of making India a developed country by 2047 requires growth closer to 8%, a target that experts consider difficult to achieve consistently. The International Monetary Fund predicts India’s growth will average 6.5% over the next few years, while the World Bank estimates 6.7%. Goldman Sachs Group Inc. sees growth of just 6% for the current fiscal year ending in March and 6.3% in the financial year 2025-26.
In the decade leading up to the pandemic, India’s average growth rate was 7%, which the country’s central bank considers the economy’s potential rate.