GDP Numbers Augur Well

A Bright Outlook GROWTH OF 6.5% OVER 9.2% IN FY24 REFLECTS A STRONG FOUNDATION; DEMAND SIDE MUST BE WORKED OUT

- Madan Sabnavis

The National Statistics Office's (NSO) estimates on GDP for FY25, at 6.5%, are the same as the second advance estimates and hence do credit to its forecasting skills. Thus, there are no surprises for the market, and it will be business as usual. The NSO's accuracy in forecasts needs to be commended given that the exercise is quite mammoth due to the considerably large unorganized sector in the economy.

The internals for the year as well as the fourth quarter are quite impressive, especially as the last quarter has posited growth of 7.4%. All through the year, various high-frequency indicators such as goods and services tax collections, e-way bill issuances, purchasing managers' index, and export of services have been sending very positive signals. The high base effect of 9.2% growth in FY24 was supposed to bring down the rate, so 6.5% is an impressive number.

Agriculture has been the big winner with growth of 4.6%, which suggests a good monsoon resulting in a stable kharif crop followed by a similar rabi crop can keep the rural economy ticking. In fact, this is a necessary condition for attaining sustainable growth over a longer period. As the monsoon forecast for FY26 is positive, indications are that rural consumption should continue to tick this year. This would be the supply side of the sector, and given the increase in minimum support price across the board for the kharif season—it will probably be replicated for rabi crops—higher output should result in higher income for farmers.