GDP slowed down this year. Will next year be better?

The slowing down in growth of the Indian economy raised problems about the medium-term direction. Against 6% for the first half of the year, the National Statistics Office (NSO) projects India's GDP to rise 6.4% in 2024–25. Although the second quarter's GDP growth dropped to just 5.4%, it is expected to recover in the later half of the year, therefore bringing the full-year average back down to over 6.7%. But this year's rise lags 1.8% points below last year's rise of 8.2%.

An important reason for the GDP fall is the industrial sector, especially production, which is likely to expand at just 5.3%, a big drop from 9.9% in 2013. At the same time, construction and electricity, gas and water supply are also seen as prey on the slow. The services sector, which has been instrumental in fueling the Indian economy growth, is also expected to see lower momentum.

That said, private consumption has remained largely resilient. While urban spending is a cause for concern, rural India is seeing the benefit of strong kharif crop output, while Rabi season prospects are good. Investment activity has slowed down. Private investments are still weak, and central government capital expenditure, an important growth driver, is 12% lower than last year. The overall fall could impact India's economic performance next year. Based on data for the first seven months, the first advance estimates see nominal India GDP growth at 9.7% this year. The growth is below the Union budget estimate of 10.5%, and it is the second year in a row that the growth will be under 10%. Such slower growth may impact the government's debt and fiscal deficit.

Looking ahead, internal as well as global elements create volatility. As the government sets its eyes on the next Union budget for the financial year, measures that can enhance investment and aim to preserve growth will come into focus. The second half of the year should signal the dawn of recovery, which could also be the case, but more clarity will come with more data. Evidently, the Indian economy will be looking to 2025 for a bounce back from the issues seen in the current year.