Pramode Mallik
At a time when India Inc is scrambling to extract as much relief from Finance Minister Nirmala Sitharaman as possible before the Union Budget 2025, the government itself has admitted officially that the GDP growth rate for FY 2024-25 would come down to 6.4% of the GDP from 8.2% in the FY 2023-24.
The provisional estimate is even lower than 6.6%, which came after the RBI revised the growth rate from 7.2%.
Govt Slashes GDP Growth Estimates
The National Statistics Office, working under the Ministry of Statistics and Programme Implementation (MoSPI) in the First Provisional Estimates for the year has said that India’s real GDP is expected to reach 184.88 lakh crore in the year.
The NSO said in its provisional estimates, “Real GDP has been estimated to grow by 6.4% in FY 2024-25 as compared to the growth rate of 8.2% in Provisional Estimate (PE) of GDP for FY 2023-24. Nominal GDP has witnessed a growth rate of 9.7% in FY 2024-25 over the growth rate of 9.6% in FY 2023-24.”
Why Did GDP Growth Rate Fall?
Experts believe, the downturn in the GDP growth rate has occurred due to reduced consumption, increased inflation, and a sluggish manufacturing sector.
Besides, the rural economy though improved, was not as high as expected or enough to compensate the losses made by the urban economy.
Earlier, the GDP has registered a growth rate of 9.7% in the current fiscal year compared to 9.6% in the fiscal year 2023-24.
Taking a cue from the NSO, the State Bank of India also slashed the GDP growth expectations. It reduced the growth expectation to 6.3% of the GDP, less than what the NSO has said.
SBI Cuts Growth Rate
The SBI has said that it had slashed the expectation due to decreased lending and manufacturing activities.
It also said that considering the general slowdown in aggregate demand, it is clear that one should not expect too much from the year 2025.
Experts believe, the subdued GDP growth rate is due to the sluggish private investment that rose by 6.4%, lower than 9% growth in the previous fiscal year.
Government spending is estimated to rise by 4.1% in 2024/25, but only about 57% of the total amount was used till the beginning of the third quarter, leaving a massive amount unspent.
Nirmala Sitharaman Has Limited Options
Experts have pointed out that as the government has declared to limit the fiscal deficit to 4.5% of the GDP, which is already under stress due to poor performance, the Finance Minister will be left with very limited options.
According to the provisional estimates of the NSO, real GDP is expected to reach 184.88 lakh crore in the year. After the GDP growth rate was slashed to 6.5% by the RBI, the Asian Development Bank and other agencies, it may hover around $3,210.38 billion. It may translate to about Rs 272.850 lakh crore of rupees.
Is it enough to cushion the Indian economy and allow Nirmala Sitharaman to give the largesse demanded by the industries, businesses and the middle class?
Experts have serious doubts. It has come at a time when the government has planned some big-ticket reforms while Nirmala Sitharaman has her purse empty. Expectations are high, ambitions are soaring, however, there is no bells ringing at the coffers.
