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India’s GDP Growth Outlook


Projected Slowdown: India’s GDP growth is expected to decline to 6.4% in FY25, down from 8.2% in FY24, marking the lowest growth rate in four years (NSO estimates).

Contributing Factors:

  • Weak Manufacturing & Investment: Despite some support from agriculture, weak manufacturing and sluggish investment are major contributors.

  • Inflationary Pressures: Nominal GDP is projected to grow by 9.7%, indicating inflationary pressures.

  • Revised Projections: The Reserve Bank of India’s revised projection stands at 6.6%, slightly above the NSO's estimate.

Key Influences on Manufacturing Slowdown

  • Weak Global Demand: Reduced global economic activity, particularly due to China’s muted growth and geopolitical tensions, impacts demand for manufactured goods.

  • Commodity Price Declines: Falling prices of essential commodities, including metals and oil, affect production costs and profitability.

  • Trade Tensions: Ongoing trade disputes, such as the U.S.-China trade war, create uncertainty and disrupt supply chains.

  • Inflation & Economic Instability: Rising inflation and broader economic instability challenge manufacturers’ efficiency.

  • Supply Chain Issues: Disruptions in global supply chains hinder production and increase operational costs.

Influences on Investment Slowdown

  • Economic Policy Uncertainty: Heightened uncertainty regarding domestic policies leads to delays and cancellations of investment projects.

  • Weak Expenditure: Both private and government capital expenditure have contracted sharply.

  • Monetary Policy Tightening: Tighter monetary policy by the Reserve Bank of India dampens consumption and investment.

  • Global Economic Factors: Fluctuations in global interest rates and geopolitical tensions add uncertainties to investment decisions.

  • Cyclical Slowdown: The economy’s cyclical slowdown discourages new investments.

India’s Comparative Growth Outlook for FY25

  • Global Average: India’s projected growth of 6.4% is significantly higher than the global average of 2.7%.

  • United States: The U.S. is projected to grow at 2.5%.

  • Euro Area: The eurozone's growth is anticipated at just 0.8%.

  • China: China’s growth is projected at 4.5%, lagging behind India’s forecast.

Overall, India's growth outlook for FY25 positions it favorably against both developed and emerging economies.

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