FinMin sees growth rate of 6% as 'decent' for slower years

The Indian economy is expected to grow at 6.4 percent in 2024-25, the lowest in four years and significantly slower when compared to the 8.2 percent growth in 2023-24.

The finance ministry sees an annual real GDP rate of around 6 percent as “decent” for years in which expenditure and consumption slow down, after a study of major economies found that growth levels of 8 to 9 percent are more episodic than consistent.

“We conducted an internal study on decadal growth rates of China, UK, US, Japan. In the US, it was broadly around 3 percent decadal growth rates, the UK was about 2.7 percent, Japan and China showed over 8 and 9 percent growth but in episodes it was never consistent," a senior government official said. “So, 6 percent is the growth rate beyond which we need to target, we need to worry if we drop below 6 percent.”

The ministry, however, is expecting the recent consumption boost, through a cut in income tax, to push the growth rate significantly above 6 percent, the government official said on condition of anonymity.

“This year, the consumption boost on income tax and with private sector capex expected to pick and if public expenditures stay strong then we can do much above 6 percent,” the official added.

In a bid to spur consumption, Finance Minister Nirmala Sitharaman in the Budget for FY26 exempted people earning up to Rs 12 lakh a year from income tax.

The Indian economy is expected to grow at 6.4 percent in FY25, the lowest in four years and significantly slower from the previous year’s 8.2 percent.

“Growth is expected to be 6.4 percent; the assumption is that H2 will be higher. We saw a fall in Q2 but H1 overall was 6 percent actually. Look at the trend, if you look at the 1990s, when liberalisation came in, 6 percent real growth rate is decent. So, we need to aim for a growth rate above 6 percent,” the official said.

India’s growth rate in the September quarter fell to a seven-quarter low of 5.4 percent as mining growth contracted and manufacturing and utility services remained muted.

A report by Moody’s Analytics on February 20 said growth may taper to 6.4 percent in the calendar year 2025 from 6.6 percent in 2024, as trade tensions are likely to impact economic activity in the Asia Pacific.

“Growth in India will creep into the low-6 percent range in coming years from 6.6 percent in 2024,” the report added, citing new tariffs and softening global demand.

US President Donald Trump in one of his first orders imposed a 25-percent tariff on Canada and Mexico, and an additional 10 percent on imports from China.

While the tariffs on Canada and Mexico were later put on hold, Trump also imposed steeper duties on steel and aluminium and has also unveiled plans to impose reciprocal levies on nations it has a high trade deficit with.

He recently said Canada and Mexico levies would be imposed as planned, likely in early March, while also threatened to “soon” slap tariffs against India and China.