Introduction
The Indian economy is projected to slow down in FY25, with real GDP growth estimated at 6.4%, marking the slowest expansion in four years. This deceleration follows an 8.2% growth in FY24 and 7.0% in FY23. The slowdown is primarily attributed to weaker investment spending, although consumption spending remains robust. Let’s delve into the key aspects of India’s macroeconomic performance in 2025.
GDP Growth Trends
Real GDP and GVA Growth
India’s real GDP is expected to grow by 6.4% in FY25, down from 8.2% last year. Growth in Gross Value Added (GVA) is also projected to decelerate to 6.4% from 7.2% in FY24. The industrial sector is expected to witness a sharp slowdown, while services and agriculture are likely to maintain moderate growth.
| Year | GDP Growth (%) | GVA Growth (%) |
|---|---|---|
| 2019-20 | 3.9 | 3.9 |
| 2020-21 | -5.8 | -4.2 |
| 2021-22 | 9.7 | 9.4 |
| 2022-23 | 7.0 | 6.7 |
| 2023-24 | 8.2 | 7.2 |
| 2024-25 (Est.) | 6.4 | 6.4 |
Sectoral Growth Trends
- Agriculture: Expected to grow by 3.8%, recovering from last year’s weak performance.
- Industry: Growth is projected to slow to 6.2% from 9.5% in FY24.
- Manufacturing: Expected to decelerate to 5.3% from 9.9% last year.
- Services: Growth is projected at 8.6%, slightly lower than the previous two years.
Consumption and Investment Trends
Private and Government Spending
Private Final Consumption Expenditure (PFCE) is expected to grow at 7.3%, up from 4.0% in FY24. Government Final Consumption Expenditure (GFCE) is also projected to grow at a faster rate of 4.1% compared to 2.5% in the previous year.
| Year | PFCE Growth (%) | GFCE Growth (%) |
|---|---|---|
| 2019-20 | 5.2 | 4.0 |
| 2020-21 | -5.3 | -0.8 |
| 2021-22 | 11.7 | 0.0 |
| 2022-23 | 6.8 | 9.0 |
| 2023-24 | 4.0 | 2.5 |
| 2024-25 (Est.) | 7.3 | 4.1 |
Investment Trends
Gross Fixed Capital Formation (GFCF), a key measure of investment spending, is expected to slow to 6.4% from 9.0% last year. The decline in investment growth is a concern for long-term economic expansion.
| Year | GFCF Growth (%) |
|---|---|
| 2019-20 | 1.2 |
| 2020-21 | -7.1 |
| 2021-22 | 17.5 |
| 2022-23 | 6.6 |
| 2023-24 | 9.0 |
| 2024-25 (Est.) | 6.4 |
Inflation Trends
Retail Inflation and Food Prices
Retail inflation, as measured by the Consumer Price Index (CPI), eased slightly to 5.2% in December 2024, down from 5.48% in November. However, inflation remains above the Reserve Bank of India’s (RBI) target of 4%.
| Month | CPI Inflation (%) | Food Inflation (%) |
|---|---|---|
| Oct 24 | 6.2 | 9.7 |
| Nov 24 | 5.5 | 8.2 |
| Dec 24 | 5.2 | 7.7 |
Fiscal Performance
Government Revenue and Deficit
The central government’s fiscal deficit stood at Rs. 8.5 trillion during April-November 2024, accounting for 52.5% of the budgeted target for FY25. Revenue collection remains strong, though corporate tax collections have been weaker than expected.
| Year | Gross Fiscal Deficit (Rs. Trillion) | % of Budgeted Target Achieved |
|---|---|---|
| 2023-24 | 9.07 | 50.7 |
| 2024-25 | 8.47 | 52.5 |
Expert GDP Growth Projections for 2025-26
Leading institutions have provided varied growth forecasts for India in the next fiscal year. While the United Nations expects 6.6% growth, HSBC predicts a slight improvement to 6.5%.
| Institution | 2024-25 Growth (%) | 2025-26 Growth (%) |
|---|---|---|
| NSO | 6.4 | N/A |
| HSBC | 6.2 | 6.5 |
| United Nations | 6.8 | 6.6 |
| IMF | 7.0 | 6.5 |
| Deloitte India | 6.4-6.8 | N/A |
Conclusion
The Indian economy is projected to witness a slowdown in 2025, with growth moderating due to weaker investment trends. While consumption remains a key driver, inflation and fiscal concerns pose challenges. Despite this, India is expected to remain one of the fastest-growing major economies globally.
Disclaimer
This article is for informational purposes only and should not be considered financial or investment advice. Readers should conduct their own research before making economic or financial decisions.