India's growth may dip below 7% for the first time in four years, economists say

Building better prospects for higher GDP growth

The Indian economy would find it challenging to achieve over 7 per cent growth for the fourth consecutive year, economists said. They pointed out that the second-quarter (Q2) Gross Domestic Product (GDP) data, which was announced on November 29, has made the task even more daunting for the government.

“A sharper than expected growth slowdown in Q2 has tilted risks to our outlook of 6.8 per cent for the current fiscal downwards,” said DK Joshi, chief economist, Crisil.

The Indian economy grew 5.4 percent in Q2 of financial year (FY) 2025, owing to a slowdown in manufacturing, utilities, and mining and a slack in government capital expenditure (capex).

Economic growth averaged 6 per cent in the first half of the year. In a bid to reach 7 per cent, it would need to grow 8 per cent in the remaining two quarters, ending March 31.

Experts indicated that the probability of growth reaching the lower end of the government’s 6.5-7 percent estimate could also be difficult.

“Building in lower-than-expected growth in the September quarter, we  expect India's FY25 real GDP at 6.3 per cent year-on-year [vs. 6.7 per cent estimated previously],” said Tanvee Gupta Jain, chief India economist, UBS.

Emkay Global’s growth estimate is even lower at 6 per cent.

“Despite likely sequential improvement ahead, we mark down our GDP forecast by 50 basis points [bps] to 6 per cent [6.5 per cent earlier] amidst slowing manufacturing and a not-too-exciting consumption story,” said Madhavi Arora, chief economist, Emkay Global.

Getting the math right

As per Moneycontrol's calculations, a 7 per cent growth in the remaining two quarters will put India’s GDP at 6.5 per cent.

However, if the economy performs as the Reserve Bank of India (RBI) envisaged, averaging 7.4 per cent growth in the remaining two quarters, the rate could push up to 6.7 per cent.

Better days ahead

Despite a sluggish Q2, economists expected a pick-up from the third quarter onwards from October 1, coinciding with the onset of the festive season.

“A strong bounce back is expected in the second half of FY25 driven by government spending, pick up in capex, strong investment and revival in consumption demand — both urban and rural. Agriculture is expected to clock robust growth in the same period,” said Jahnavi Prabhakar, an economist at Bank of Baroda (BoB).

However, experts indicated that recovery would also depend on the government ramping up capex spending, the inflation outlook, and the impact of US tariffs on global growth after President-elect Donald Trump assumes office in January.

Manufacturing activity slipped to a joint 11-month low of 56.5 in November, according to data released on December 2.

Until October, the central government’s capex spending had remained below 42 per cent of the budget target of Rs 11.1 lakh crore, as compared with 54.7 per cent spent during the similar period in the last fiscal.