Skip to main content

India's GDP growth based on 1st Advance estimate and its implications

 Here's a summary of the press release on the First Advance Estimates of Gross Domestic Product (GDP) for 2024-25 in India, including relevant graphs and tables.

Key Highlights:

  • Real GDP Growth: The Indian economy is estimated to grow by 6.4% in FY 2024-25, compared to the provisional estimate of 8.2% in FY 2023-24.
  • Nominal GDP Growth: Nominal GDP (GDP at current prices) shows a growth of 9.7% in FY 2024-25, up from 9.6% in FY 2023-24.
  • Real GVA Growth: Real Gross Value Added (GVA) is projected to grow by 6.4% in FY 2024-25, compared to 7.2% in FY 2023-24.
  • Nominal GVA Growth: Nominal GVA has a growth rate of 9.3% in FY 2024-25, up from 8.5% in FY 2023-24.
  • Sectoral Performance:
    • Agriculture: Real GVA growth is estimated at 3.8%, a significant increase from 1.4% in FY 2023-24.
    • Construction: Shows strong growth of 8.6%.
    • Financial, Real Estate & Professional Services: Registered a growth of 7.3%.
  • Consumption Expenditure:
    • Private Final Consumption Expenditure (PFCE): Grew by 7.3% in FY 2024-25 (4.0% in FY 2023-24).
    • Government Final Consumption Expenditure (GFCE): Rebounded to a 4.1% growth rate from 2.5% in the previous financial year.

Below are some of the relevant graphs to be considered for understanding the health of Indian economy:












  • The 1st Advance estimate of GDP for FY25 describes a mixed picture of India's economic performance in FY25, showing deceleration in some key areas despite overall growth. Let's summarize the key points and their implications:

    Key Observations and Implications:

    • GDP Growth Slowdown: Real GDP growth has significantly slowed, and nominal GDP growth shows stagnation. This indicates a weakening overall economic expansion.
    • Per Capita Nominal GDP Increase: Despite the slowdown, per capita nominal GDP is projected to rise substantially (almost Rs 35,000 more than FY23). This suggests that even with reduced overall growth, the increase in per capita income is driven by population factors.
    • Agriculture: Positive growth in agriculture is encouraging. A 3.8% increase in FY25 versus 1.4% in FY24 signals continued strength in this vital sector.
    • Industry Slowdown: All sub-segments of the industrial sector are expected to decelerate in FY25. The sharp decline from 9.5% in FY24 to a projected 6.2% in FY25 is a major concern, suggesting potential weakness in manufacturing and mining.
    • Service Sector Slowdown: The service sector, while still growing (7.2%), is also experiencing a deceleration. Reduced growth in "Trade, hotels, transport..." and "Financial..." sectors contributes to this overall decline. Public administration remains a relatively strong performer.
    • Aggregate Demand Weakness: The overall picture points to a weakening aggregate demand. Although government consumption and exports show positive growth, the significant slowdown in gross capital formation and valuables is worrisome. The decline in capital formation is particularly concerning for long-term economic growth. The negative real growth in imports also reflects this deceleration.
    • Private Consumption: While private consumption shows strong real growth (7.3%), exceeding per capita GDP growth, this may be unsustainable. The text suggests that this could be financed by reduced savings, a potentially problematic trend.
    • Credit Market Stress: Stress in the credit market, particularly among NBFCs and in certain banking segments (small ticket advances, credit cards), is a significant concern. The sharp slowdown in credit growth (from 15.4% YTD in the previous year to 7.0% YTD in FY25) directly points toward an impending GDP slowdown. This is further supported by empirical evidence linking credit growth to GDP.



Courtesy:RBI, SBI Research

Overall Assessment:

The Indian economy in FY25 is displaying a complex scenario. While per capita nominal GDP is expected to grow, this masks a significant deceleration in real GDP growth and concerning trends in various sectors. The weakening aggregate demand, slowdown in capital formation, and stress in the credit market pose significant risks to future economic prospects. The strong performance of private consumption may not be sustainable in the long run, potentially leading to increased debt and decreased savings. Close monitoring of the credit market and investment activity is crucial. The relatively positive performance in agriculture may cushion the impact of the slowdown in other sectors, but continued weakness in industrial and service sectors will likely impact future GDP growth.

First Interest rate cut by RBI in Feb 25 Monetary policy is expected and this may provide some impetus to the industry and individuals in managing their interest costs. This is likely to give a boost to GDP in the coming quarters.

Comments

Post a Comment

Popular posts from this blog

How to prepare for the consequences of Iran war

  The COVID-19 pandemic has taught us valuable lessons about resilience in business. One key takeaway is the importance of conserving cash and other resources that may become scarce during challenging times. Businesses must prioritize financial prudence to sustain operations and navigate uncertainties effectively. This approach not only helps in weathering immediate crises but also positions organizations for long-term stability and growth. Reflecting on these lessons can guide future strategies and enhance preparedness for any unforeseen events.
Post a Comment
Read more

Why Indian Rupee is falling steeply against US dollar?

  The Indian Rupee recently crossed the 97 mark against the US Dollar, and it doesn't seem to be slowing down. If you've been tracking exchange rates or planning a trip abroad, you've probably felt the pinch. Everything from imported electronics to cooking oil is getting more expensive. And your money just doesn't stretch as far as it used to. This isn't a one-day blip. The rupee has been on a steady downward slide for months, and the reasons go deeper than most headlines suggest. It's a mix of what's happening inside India's economy and what's happening across the globe. Trade deficits, foreign investors pulling out money, rising oil prices, the US Federal Reserve keeping interest rates high — all of these are pulling the rupee in the wrong direction at the same time. In this post, we'll break down the key domestic pressures weighing on the rupee and the global forces making the US Dollar stronger. We'll also look at what the Reserve Bank ...
Post a Comment
Read more

Hanuman and Ganesha!

  The two major loved deities of the Hindu pantheon are Hanuman and Ganesha. Let us dwell into the concepts and significance of these two dieties. Ganesha, the son of Parvati and Shiv, is worshipped first before starting any new job or work. Even if you want to start writing or reading , you invoke the blessings of Lord Ganesha who goes under various names- Ganapathi, Vigneshwar, Vinayak, and  Pillayar in Tamilnadu. Ganesha Gayathri, Pancharatnam are some of the important Ganesha mantras and hymns. Adi Ganesha idol is in a Temple near Tiruvarur in Tamilnadu with a human face.The mythological story says that Shiv slew His head and then fixed the head of the animal that He saw first after this beheading of His son. Ganesha after that with the elephant head is worshipped as the wisdom god by Hindus. Why only Hindus. He is worshipped in Indonesia where He finds Himself in their currency notes. He is considered the destroyer of evil in Japan. In Mexico, Ganesha idols were said to h...
Post a Comment
Read more