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The State Bank of India (SBI) has projected India's GDP growth for the fiscal year 2025 (FY25) at 6.3%, with a notable 'downward bias'. This prediction signifies a less optimistic outlook compared to the National Statistical Office's (NSO) latest estimate of 6.4% growth for the current fiscal year (FY24), which itself represents a four-year low. The SBI's projection highlights several challenges impacting the nation's economic trajectory, underscoring the complexities and uncertainties facing the Indian economy in the coming year.
A key aspect of the SBI report focuses on the divergence between real GDP growth, nominal GDP growth, and per capita nominal GDP growth. While the report indicates a sharp deceleration in real GDP growth and near stagnation in nominal GDP growth, it projects a significant increase in per capita nominal GDP in FY25. This suggests that despite the overall slowdown in economic expansion, the average income per person is expected to rise considerably compared to FY23. The report quantifies this increase, stating that the NSO estimate for per capita GDP in FY25 is almost Rs 35,000 more than in FY23. This divergence emphasizes the importance of analyzing economic indicators holistically, rather than relying solely on headline GDP figures.
The SBI attributes the lowered expectations for FY25 to several factors. Slower growth in both manufacturing and credit sectors is cited as a significant contributing element. Furthermore, the report notes the influence of a high base effect from the previous fiscal year. This means that the comparatively strong growth in FY24 makes it more challenging to achieve similar levels of expansion in FY25. The First Advance Estimates (FAE) of GDP further support this assessment, indicating a broader slowdown in overall demand throughout FY24. This suggests that the underlying economic momentum has weakened, contributing to the more cautious forecast for the coming year.
Sector-specific analysis within the SBI report offers a more granular perspective on the projected growth. Government consumption is expected to contribute positively, with projections of 8.5% growth in nominal terms and 4.1% in real terms. This suggests that government spending will offer some degree of support to the overall economy. However, the outlook for industrial sectors is less positive. All industrial sub-sectors are expected to experience slower growth in FY25, with an overall projected industry growth rate of 6.2%. This represents a considerable deceleration from the 9.5% growth achieved in FY24. The report specifically highlights the expected sharp deceleration in both manufacturing and mining sectors. In contrast, the agriculture sector is projected to perform relatively better, with a projected growth rate of 3.8% in FY25, compared to 1.4% in FY24. This improved agricultural performance could partially offset the slowdown in other sectors.
The First Advance Estimates (FAE) provide early indicators of GDP trends and underscore the slower growth anticipated for FY25. This necessitates a carefully calibrated policy response from policymakers. Maintaining momentum in crucial sectors while simultaneously addressing the challenges contributing to the downward bias requires a balanced approach. This delicate balancing act will be crucial in ensuring that India's economy navigates this period of slower growth effectively and maintains a sustainable trajectory in the long term. The SBI's report serves as a valuable early warning system, highlighting the need for proactive measures to mitigate the potential negative impacts of the projected slowdown and to foster a more resilient and robust economic environment.
The challenges outlined in the SBI report highlight the intricate interplay of various economic factors influencing India's growth prospects. The slowdown in manufacturing and credit growth, the high base effect, and the relatively weaker demand all contribute to a more cautious outlook for FY25. The report's detailed sector-specific analysis provides insights into the specific areas requiring attention from policymakers. The divergence between real GDP, nominal GDP, and per capita nominal GDP growth underscores the complexity of interpreting economic data and the importance of considering multiple indicators to gain a complete understanding of the economic situation. The projections presented in the SBI report provide a crucial benchmark for policymakers, researchers, and investors to assess the current economic climate and formulate appropriate strategies for the future.
Furthermore, the report’s focus on per capita nominal GDP growth offers a contrasting perspective on the overall economic health of the nation. While the overall GDP growth might be lower than anticipated, the improvement in per capita income signifies progress in improving the living standards of the average Indian citizen. However, this positive development should not overshadow the necessity of addressing the challenges that are contributing to the overall slowdown in GDP growth. The emphasis on a balanced policy approach underscores the need for a multi-pronged strategy that tackles the issues hindering growth in manufacturing and credit sectors while simultaneously supporting crucial sectors like agriculture and government consumption. The success of such an approach will hinge on the ability of policymakers to effectively manage the complex interplay of these factors, ensuring a sustainable path towards economic prosperity in the coming fiscal year.
Source: SBI sees India's FY25 GDP at 6.3% with downward bias