India GDP Growth Forecast: FM pegs nominal GDP growth at 10.5%

Finance Minister Nirmala Sitharaman kept the nominal growth target unchanged at 10.5 percent for 2024-25, in the government's maiden budget.

Nominal GDP is expected to decline to Rs 326.4 lakh crore in FY25, compared with Rs 327.7 lakh crore target set in the Interim Budget. Nominal growth had averaged 9.6 percent to Rs 295.4 lakh crore from 269.5 lakh crore in the previous year 2023-24, according to provisional estimates released by the National Statistical Office on May 31.

This slowed down from 14.2 percent in the preceding year. The real GDP expanded at 8.2 percent in FY24 compared with 7 percent in the previous year.

The decline, economists contend, was due to the wholesale price index slipping into deflation in FY24.

Wholesale inflation remained negative for the better part of the year, with prices in the positive territory only in the last quarter. The WPI inflation had slipped to (-)0.7 percent in FY24, compared with 9.4 percent in the previous year.

Indian economic prospects have improved since the Interim Budget in February, with the central bank and international agencies delivering a spate of revisions on the back of the previous year’s growth numbers.

The Reserve Bank of India revised the FY25 real GDP growth forecast upwards to 7.2 percent in June from 7 percent pegged earlier.

This was followed by a similar revision from Fitch Ratings. The International Monetary Fund now expects the economy to grow at 6.8 percent, 0.3 percentage points higher than previously anticipated 6.5 percent.

The Asian Development Bank too has raised India’s growth forecast to 7 percent from 6.7 percent earlier.

A higher real growth is also likely to lift the nominal growth.

India’s industrial production rose 5.9 percent in May from 5 percent in April, showing improving prospects for the economy in the first quarter of FY25.