India forecast annual growth of 6.4% in the year ending in March, the slowest in four years and below the lower end of government's initial projection, dragged by a weaker manufacturing sector and slower corporate investments.
India's had initially projected a growth rate of 6.5%-7%.
The forecast by the National Statistics Office (NSO) follows several disappointing economic indicators in the second half of 2024 - including low growth, high inflation, anaemic capital flows and a record trade gap - that cast doubt on the robustness of the country's growth.
Last month, the Reserve Bank of India lowered its growth forecast for the year ending March 2025 to 6.6%, from its earlier forecast of 7.2%, after India reported lower-than-expected growth of 5.4% in July-September, its slowest pace in seven quarters.
The full year projection suggests growth will revive somewhat in the second half of the year to 6.7%, said Aditi Nayar, chief economist at rating agency ICRA.
In nominal terms, which include inflation, the economy is expected to grow 9.7%, compared with the 10.5% estimate in the annual federal budget announced in February 2024.
Nayar added that given the slowdown in government spending earlier this year, India might trail its budget gap estimate of 4.9% for the current financial year.
Private consumption, which accounts for nearly 58% of GDP, was seen expanding by 7.3% year-on-year compared to 4% in the previous fiscal year.
But private investment is seen rising by 6.4%, lower than 9% growth in the previous year. Government spending is estimated to rise by 4.1% year-on-year in 2024/25, up from a 2.5% increase in the previous fiscal year.
Sectorally, growth is seen supported by a pick-up in farm output, which contributes about 15% of GDP and employs more than 40% of the workforce. Farm output growth is seen picking up to 3.8% in the current fiscal year, from 1.4% a year ago, following an abundant monsoon.
Manufacturing, which accounts for about 17% of GDP, is projected to expand at 5.3% year-on-year in 2024/25, compared with 9.9% a year ago, while construction output was seen growing by 8.6%, down from 9.9% in the previous year, data showed.
The advance estimates will see further revisions and Madhavi Arora, economist at Emkay Global, said the figure might be optimistic.
The economy might face "downward pressure, implying a downside risk to the 6.4% estimate," amid weaker investments by companies, she said.
Growth debate
India's central bank said last month the underlying reason for the slowdown in growth was inflation, which has eroded purchasing power of urban consumers.
But in a rare comment, the government's latest monthly economic report said the central bank's monetary policy stance and regulatory measures may have caused a demand slowdown.
The report added the growth outlook for October to December appeared bright, with rural demand remaining resilient and urban demand picking up.
Indicators from corporate earnings have remained mixed.
Among the first major corporates to report third quarter earnings, India's Dabur, which makes products ranging from honey to toothpaste, estimated its revenue rose in the low single-digit percentage range in the third quarter due to subdued demand for healthcare and beverage products. But jewellery and watch company Titan reported robust demand.
Growth in the year beginning April 1, 2025 will be influenced by global and domestic uncertainties, said ICRA's Nayar, projecting GDP growth of 6.5% in the next financial year.
