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  1. India's GDP likely to grow at 6.3% in FY2025, marginally below govt estimates: SBI report

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India's GDP likely to grow at 6.3% in FY2025, marginally below govt estimates: SBI report

Upstox

3 min read | Updated on January 08, 2025, 17:24 IST

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SUMMARY

The SBI Research report highlighted concerns about slowing industrial and services sector growth, a deceleration in capital formation, and reduced bank credit.

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India’s GDP growth for FY25 is projected at 6.3%, slightly below the government’s earlier estimate of 6.4%, according to SBI Research.

India’s GDP is expected to growth at 6.3% in the financial year 2024-25, marginally below the government’s first advance estimate of 6.4%, according to a report by SBI Research.

The government’s estimates, released on January 7, projected GDP at ₹184.88 lakh crore for FY25 at constant prices, marking a slowdown from the 8.2% growth recorded in FY24.

SBI Research also cautioned that the growth trajectory for FY25 might face further downward bias due to sluggish trends in key economic indicators.

"Historically, the difference between RBI and NSO estimates ranges between 20-30 basis points. The 6.4% estimate for FY25 is along expected lines, but we believe GDP growth could moderate to around 6.3%," the report said.

The report flagged a slowdown in industrial output, with the industry sector’s growth expected to decelerate to 6.2% in FY25 from 9.5% in FY24. Manufacturing and Mining, key drivers of industrial activity, are likely to see muted performance.

The services sector, which has been a major growth driver, is also likely to experience moderation, growing at 7.2% in FY25 compared to 7.6% in FY24. Sub-segments like trade, transport, and communication are expected to pull down overall growth, with their expansion slowing to 5.8% from 6.4% last year.

Buoyed by robust policy measures and infrastructure investments, the agriculture sector, on the other hand, is projected to grow by 3.8% in a major improvement from 1.4% in FY24.

The report flagged concerns over the slowdown in gross capital formation, which grew by just 6.4% in real terms, and a contraction in real imports by 1.3%.

"The private consumption registered the highest growth of 7.3% in real terms and its per capita equivalent registered a growth of 6.3%," it said.

The report also noted that while government spending is expected to grow by 4.1% in real terms, the pace of capital expenditure at both the central and state levels has been lower than the four-year average, potentially hindering high GDP growth.

A slowdown in bank credit is another area of concern. Incremental credit from all scheduled commercial banks (ASCBs) stood at ₹11.5 lakh crore year-to-date in FY25, significantly lower than the ₹21 lakh crore in the corresponding period of FY24.

"Empirical evidence does suggest slowdown in credit will push a slowdown in GDP," the report said.

The second advance estimates for FY25, along with updated GDP data for the October-December quarter, will be released on February 28, 2025, by the National Statistics Office.

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