Editors pick newsletter GDP growth at 6.5% in 2024-25, slowest since the pandemic

The Hindu

a day ago

While a significant uptick in economic activity in the fourth quarter (Q4) of financial year 2024-25 pushed Gross Domestic Product (GDP) growth for the full year to 6.5%, as per the provisional estimates for 2024-25 released by the government on Friday, this is the slowest since the pandemic year 2020-21. As per data released by the Ministry of Statistics and Programme Implementation, real GDP growth in Q4 of 2024-25 accelerated to 7.4%, the fastest quarterly growth in the year. It was still slower than 8.4% growth seen in Q4 of the previous financial year. Quarterly GDP growth in Q3 stood at 6.4%. Chief Economic Adviser V. Anantha Nageswaran, in a press briefing following the release of the data, sought to downplay the post-COVID slowdown of the economy, saying that India has held its own in a 'growth-scarce' global environment. 'If you look in real terms, India's growth rate differential in comparison to the average growth rate of advanced economies was on the lower side during the 'boom era' between 2003 and 2010,' Mr. Nageswaran explained. 'The growth differential post COVID is higher than the growth differential in the 'boom era'.' 'In other words, in a growth-scarce environment post COVID and despite the rising uncertainties due to political conflicts and trade tensions, India is holding up its growth numbers better than many advanced economies,' he added. The agriculture sector continued its strong performance in Q4, leading to a relatively strong showing for the full year. The 'Agriculture, Livestock, Forestry & Fishing' sector grew 5.4% in Q4 of the year, up from 0.9% in Q4 of 2023-24. This helped propel the full year's growth for the sector to 4.6% in 2024-25, up from 2.7% in 2023-24. The manufacturing sector's growth stood at 4.8% in Q4 of FY25, the second fastest quarterly growth in the year, on a high base of 11.3% in Q4 of the previous year. The sector grew 4.5% in the full financial year 2024-25, down from 12.3% in 2023-24. The construction sector returned to double-digit growth of 10.8% in the fourth quarter, the fastest in the year, and faster than the 8.7% seen in Q4 of 2023-24. The sector's full-year growth stood at 9.4% in 2024-25, down from 10.4% in 2023-24. Growth in the tertiary sector — a composite of all the services sectors — stood at 7.3% in Q4, in line with the growth in Q2 (7.2%) and Q3 (7.4%). Growth in Q4, however, was slower than the 7.8% seen in the fourth quarter of 2023-24. In the full year 2024-25, the tertiary sector grew at 7.2%, lower than the 9% in the previous year. The data released on Friday also showed that growth in household consumption quickened to 7.2% in 2024-25 from 5.6% in the previous year. Gross Fixed Capital Formation, a measure of asset creation by the public and private sector, saw growth slowing to 7.1% in 2024-25 from 8.8% in 2023-24. This is despite growth in this spending quickening to a six-quarter high of 9.4% in Q4. For FY26, the Reserve Bank of India has cut India's growth forecast to 6.5% from 6.7% estimated earlier for the current financial year on account of impact of global trade and policy uncertainties.
In another set of numbers, the Government has met its fiscal deficit target of 4.8% of GDP in 2024-25 though total receipts came in slightly lower than expected, as per data released by the Controller General of Accounts. The Centre's total revenue — counting tax, non-tax and capital receipts — came in at ₹30.78 lakh crore in 2024-25 or 97.8% of its revised estimates for the year. Total expenditure stood at ₹46.55 lakh crore, also 97.8% of the estimates. The fiscal deficit, the difference between total expenditure and total revenue, at ₹15.77 lakh crore, stood at 4.8% of GDP based on the latest provisional estimates for the year. As part of the Centre's fiscal consolidation glide path, Finance Minister Nirmala Sitharaman had, in Budget speech in February, targeted fiscal deficit of 4.4% of GDP for FY26. Closer examination of the data show total revenue fell short of the revised estimates due in large part to a shortfall in miscellaneous capital receipts, that includes disinvestment proceeds. There was also a minor shortfall in tax revenue. The Centre earned ₹17,202 crore as miscellaneous capital receipts or just 52.1% of revised estimates for FY25. Department of Investment and Public Asset Management data show the government earned ₹10,131.32 crore via disinvestments in 2024-25. Corporate tax collection at ₹9.87 lakh crore in FY25 was 0.7% higher than revised estimates. Income tax collections, on the other hand, at ₹11.83 lakh crore were almost 6% lower than revised estimate.
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