India's economic trajectory under Prime Minister Narendra Modi has been a subject of intense discussion and analysis. Recent data indicates a mixed bag of achievements and challenges, requiring a nuanced understanding of the various factors at play. While the economy has demonstrated resilience and growth in certain sectors, there are also areas where performance has been less than satisfactory.
The latest figures reveal that India's GDP grew by 6.5% in the financial year 2024-25, marking the slowest pace in four years. This figure, released by the National Statistics Office (NSO), is lower than the growth experienced in the pandemic recovery years. However, a closer look at the quarterly data paints a more optimistic picture. The real GDP growth for the March quarter (Q4) stood at 7.4%, the fastest among all four quarters of the year. This suggests a potential rebound in economic activity towards the end of the fiscal year. The International Monetary Fund (IMF) projects India will overtake Japan in economic size by the end of the year, reaching $4.18 trillion.
Several sectors contributed to this growth, with construction leading the way at 9.4% in FY 2024-25. Public administration, defense, and other services also performed strongly, registering 8.9% growth, while financial, real estate, and professional services grew by 7.2%. However, the manufacturing sector experienced a slowdown, growing at just 4.8% compared to 11.3% in the previous year's Q4.
One notable aspect of the GDP growth is the significant contribution of net taxes, which grew by 12.7% in Q4. This statistical boost helped to achieve the 7.4% growth rate, but without it, the actual economic activity would have come in at around 6.8%. Furthermore, private final consumption expenditure grew at 6% in Q4, the slowest in five quarters, suggesting that the anticipated "Maha Kumbh effect" on consumption did not materialize as expected.
Despite these challenges, government officials have expressed satisfaction with the 6.5% growth, emphasizing that it is still the fastest among major economies in a "growth-scarce" global environment. However, experts caution that "not bad" is not good enough for India, especially considering the country's aspirations to become a 'Viksit Bharat' (Developed India) by 2047. Achieving this goal requires sustained economic growth of close to 8% every year for at least a decade.
Several initiatives have been undertaken to boost the manufacturing sector, including "Make in India" and "Atmanirbhar Bharat" (self-reliant India). These programs aim to attract foreign direct investment and incentivize domestic industrialists to establish large-scale manufacturing operations. The government has also focused on easing regulatory burdens and labor reforms to facilitate manufacturing-led transformation. Targeted incentives and subsidies have been offered to strategic sectors like semiconductors, electric vehicles, and textiles to bolster domestic production capabilities.
Looking ahead, India's economic trajectory will depend on addressing key challenges such as job creation, rural development, and geopolitical complexities. While the country has made significant progress in reducing extreme poverty, inequality in consumption remains a concern. The government needs to strike a balance between bold reforms and inclusive growth to ensure that the benefits of economic progress reach all sections of society.
