Concerning news has emerged regarding India's economic outlook. Credit rating agency ICRA has revised downward its projection for the country's GDP growth rate for fiscal year 2024-25 to 6.3%, compared to the National Statistical Office's (NSO) February estimate of 6.5%.
Lower-than-Expected Growth in the Fourth Quarter
ICRA's report indicates that India's GDP growth during the March quarter (Q4 FY25) may be 6.9%, significantly lower than the NSO's earlier projection of 7.6%. This could directly impact the overall annual growth rate.
FY25 GDP Growth Projected at Only 6.3%
ICRA suggests that the full-year GDP growth for FY2024-25 may be limited to 6.3%, considerably lower than the previous year's 9.2% growth. This decline is considered worrisome.
According to the report, this reduction is primarily attributed to an imbalance in private consumption and investment.
Slowdown in Investment and Consumption
According to Aditi Nayar, Chief Economist at ICRA, the fourth quarter witnessed a lack of acceleration in private consumption and investment activities. She highlighted that uncertainty surrounding tariff policies is a key factor impacting investment momentum.
Strong Service Sector Performance, but Weak Merchandise Exports
ICRA's report also notes that service exports have consistently recorded double-digit growth. Conversely, merchandise exports, positive in December, showed a decline in the March quarter.
Eyes on May 31st for Official Data
All eyes are now on May 31st, 2025, when the NSO will release the provisional GDP data for Q4 and FY25. This will clarify whether ICRA's projection is accurate or if the official figures offer some relief.
Implications for Investors and Policymakers
The downward revision of India's GDP growth highlights the need for a review of economic strategies. For investors and market watchers, this is a time to exercise caution.
