India’s Economy Grows 6.2% in Q4 2024, Falls Short of Forecasts

Government Remains Confident Despite Expert Skepticism

India’s economic performance in the last quarter of 2024 showcased a growth rate of 6.2%, marking a rebound from the previous quarter’s 5.6% but falling below the expectations set by economists and the central bank. According to the Indian Statistics Office, the nation’s gross domestic product (GDP) for October to December 2024 rose by 6.2% compared to the same period in 2023. While this uptick signals a recovery, it lagged behind the Reserve Bank of India’s projection of 6.8% and the 6.3% anticipated by economic analysts surveyed by Reuters. This detailed analysis dives into the factors driving this growth, the government’s ambitious targets, and the challenges highlighted by experts regarding India’s economic outlook for 2025.  

The 6.2% GDP growth in the fourth quarter of 2024 was fueled primarily by robust increases in government spending and personal consumption. Government expenditure surged by 8.3% year-over-year, reflecting ongoing investments in infrastructure and public projects, while household spending climbed by 6.9%, buoyed by policies aimed at boosting consumer confidence. However, the manufacturing sector, which accounts for roughly 17% of India’s economy, remained a weak link, growing at just 3.5%. This sluggish performance in manufacturing growth in India underscores persistent structural challenges, including supply chain disruptions and subdued global demand, which continue to hinder the sector’s potential. Despite these hurdles, India’s economic recovery in Q4 2024 demonstrates resilience, particularly in domestic demand, a cornerstone of the nation’s growth strategy.  

India’s government remains optimistic about achieving its annual growth target of 6.5% for the 2024-2025 fiscal year, which spans April 2024 to March 2025. Anantha Nageswaran, Chief Economic Advisor to the Finance Ministry, emphasized the strength of rural demand and predicted a revival in urban consumption as key drivers to meet this goal. To hit the 6.5% mark, India’s GDP growth in the first quarter of 2025 (January to March) would need to reach approximately 7.6% to 7.7%, a steep climb from the current trajectory. To support this ambition, the government and the Reserve Bank of India have rolled out proactive measures. In early February 2025, the central bank lowered interest rates for the first time since the COVID-19 pandemic, aiming to stimulate borrowing and investment. Additionally, the 2025-2026 fiscal budget introduced income tax relief and tariff reductions to spur consumer spending, reflecting a multi-pronged approach to achieving sustainable economic growth in India.  

Despite these efforts, economic experts remain cautious about the feasibility of the government’s targets, citing global uncertainties and domestic weaknesses. Upasna Bhardwaj, an economist at Kotak Mahindra Bank, described the 6.5% forecast as overly optimistic, warning that downside risks persist amid fluctuating world trade conditions. She argued that India’s economic growth projections for 2025 could fall short unless additional stimulus measures address these external pressures. Similarly, Diraj Nim, an economist at ANZ Bank, acknowledged the Q4 rebound but noted that India’s growth remains below its full potential. He suggested that if economic momentum slows further, a more aggressive interest rate cut might be necessary to sustain recovery. These expert insights highlight the delicate balance India must strike between leveraging domestic strengths and navigating an unpredictable global economic landscape.  

Looking ahead, India’s economic outlook for 2025 hinges on several critical factors. Forecasts from sources like Deloitte Insights and the International Monetary Fund (IMF) estimate GDP growth to range between 6.3% and 6.8% for the year, driven by strong internal demand, continued government investment in infrastructure, and a stable political environment. However, challenges such as inflation management, manufacturing revitalization, and global trade volatility could temper this progress. The agricultural sector’s recovery and sustained urban consumption will also play pivotal roles in determining whether India can close the gap between its current performance and the government’s lofty aspirations.  

Delving deeper into the data, the quarterly GDP trends reveal both opportunities and vulnerabilities. The 6.7% growth in Q1 (April-June 2024) and the dip to 5.4% in Q2 (July-September 2024) preceded the 6.2% rise in Q4, illustrating a volatile yet upward trajectory. The government’s reliance on public spending and consumer activity has proven effective, but the manufacturing sector’s underperformance remains a glaring concern. Addressing this will require targeted policies to enhance industrial productivity and global competitiveness, areas where India has historically lagged behind peers like China. Moreover, with inflation hovering around 4-4.5%, any upward pressure could erode purchasing power, further complicating the path to robust economic growth in India for 2025.  

The broader context of India’s economic performance in 2024 and 2025 positions it as a standout among emerging markets. Reports from the United Nations and other international bodies praise India’s ability to maintain growth amid global headwinds, attributing this to sound governance and a focus on infrastructure development. Yet, the disparity between official optimism and expert skepticism underscores the need for a nuanced understanding of India’s economic challenges. Whether through deeper monetary easing or innovative fiscal policies, the government’s ability to adapt will determine if India can transform its Q4 2024 rebound into a springboard for sustained prosperity. For now, the 6.2% growth serves as a testament to resilience, even as it falls short of the high expectations set for one of the world’s fastest-growing economies.