Understanding the implications of India's revised GDP growth outlook

India's GDP growth rate forecast for FY25 has recently been revised downwards by several institutions, reflecting a broader economic slowdown.

- Dr. Rajiv Khosla

Various challenges, both domestic and global, have contributed to this downshift, including reduced corporate profitability, public capital expenditure constraints, a slowdown in manufacturing, and weaker urban consumption. Notably, Moody's has cut its projection to 7% from 8.2%, while Care Ratings revised its forecast down to 6.5% from 6.8%. Nomura also reduced its estimate to 6.1% from 6.4%, and the State Bank of India (SBI) lowered its estimate to 6.3% from the National Statistical Office's (NSO) initial projection of 6.4%. Additionally, the Reserve Bank of India (RBI) revised its growth estimate to 6.6% from 7.2%, and the NSO's First Advance Estimates (FAE) projected a GDP growth rate of 6.4% for FY25, a significant decline from the 8.2% growth seen in FY24. To better understand the causes and potential effects of this downward revision, a detailed analysis of the First Advance Estimates (FAE) from the Ministry of Statistics and Programme Implementation is presented below.

Table 1 outlines the nominal and real GDP growth in India over the past decade. It is important to note that India's real GDP growth has been declining consistently over the past four years, from 9.7% in 2021-22 to a projected 6.4% in FY25.