India's Economic Growth Slows to 6.4% in FY25, Raising Concerns for FY26

71
1
India's Economic Growth Slows to 6.4% in FY25, Raising Concerns for FY26

India's Economic Growth Projected at 6.4% for FY25, Raising Concerns for FY26

The Indian economy is projected to grow at 6.4% in the current fiscal year (FY25), according to the first advance estimates released by the Ministry of Statistics and Programme Implementation. This is lower than the 7.2% growth rate achieved in FY24, raising concerns about the growth prospects for FY26.

The slowdown in growth is attributed to several factors, including a strong base effect, general elections, weak private sector capital expenditure, and monetary and fiscal tightening. While private consumption has shown a sharp rebound with an estimated growth of 7.3% this fiscal, challenges remain in private investment demand and subdued government spending.

The agriculture sector is expected to grow by 3.8% this fiscal, while mining and quarrying are forecast to grow by 2.9% and manufacturing by 5.3%. The fastest growth is estimated in public administration, defense, and other sectors at 9.1%, followed by construction at 8.6% and financial, real estate, and professional services at 7.3%.

Despite the pick-up in private consumption, private sector investment remains sluggish, with gross fixed capital formation estimated to grow by 6.4% in FY25 compared to 9% last fiscal. This highlights the need for further measures to boost investment and sustain growth momentum.

Most analysts expect growth to remain below 7% in FY26 as well. Global uncertainties, along with domestic factors like high inflation and slowing credit growth, pose significant challenges. Experts emphasize the need for continued government measures to support infrastructure expansion and revive domestic demand to achieve higher growth in the medium term.