GDP Growth Slowdown in India: 2024–25

What Happened?

• India’s GDP growth has decelerated from 9.2% in FY 2023–24 to an estimated 6.5% in FY 2024–25, according to preliminary data from the Ministry of Statistics and Programme Implementation (MoSPI) and the Reserve Bank of India (RBI).
• While agriculture has remained resilient, a notable slowdown is observed in industry and services, prompting concerns about the sustainability of post-COVID recovery.

Key Sector-Wise Performance

Reasons for the Slowdown

1. Global Factors

• Tight monetary policies in advanced economies (like the US Fed’s stance) have impacted FDI and exports.
• Ongoing geopolitical tensions (e.g., West Asia conflict, Red Sea shipping crisis) have disrupted supply chains and increased oil prices.

2. Domestic Constraints

• High interest rates by RBI to curb inflation have impacted credit growth and private investment.
• Rural demand recovery has been uneven, despite normal monsoons.
• Jobless growth in manufacturing and services dampens consumer spending.

3. Base Effect

• The sharp 9.2% growth in 2023–24 was also aided by a favourable base and post-COVID rebound, making current numbers appear lower by comparison.

Implications

• Revenue Collection: Slower GDP affects tax buoyancy and fiscal space for government spending.
• Unemployment Concerns: Job creation has not kept pace with labor force growth, especially in urban and youth segments.
• Investment Outlook: Private sector remains cautious; public investment is shouldering the burden.
• Inclusive Growth Challenge: The resilience of agriculture highlights the need for support to lagging urban sectors and MSMEs.

Government & RBI Measures

• RBI kept the repo rate unchanged at 6.5% (2025) to balance inflation control with growth.
• Union Budget 2025–26 emphasized:
  • Increased capital expenditure in infrastructure
  • MSME credit facilitation
  • Enhanced outlay for rural development and skilling
• PLI Schemes extended to labor-intensive sectors to revive manufacturing

UPSC Relevance

Prelims:

• GDP vs GVA
• Role of MoSPI and NSO
• Base effect and its influence on growth numbers

Mains GS Paper III:

• “What are the causes and consequences of the recent GDP growth slowdown in India? Suggest measures to achieve inclusive and balanced growth.”
• “Discuss the role of fiscal and monetary policy in sustaining economic recovery.”

Conclusion

India’s GDP growth moderation from 9.2% to 6.5% is a cautionary signal. While the country remains one of the fastest-growing major economies globally, the slowdown underscores the need for balanced growth across sectors, improved investment climate, and targeted reforms to support vulnerable segments and ensure long-term macroeconomic stability.