India’s GDP growth rebounded in the third quarter to 6.2 percent, ending the slowdown streak seen over the previous few quarters. The acceleration was driven by rural demand, higher government spending and better agricultural output, though manufacturing and private investments lost momentum. According to Chief Economic Adviser V Anantha Nageswaran, the fourth quarter needs to turn in 7.6 percent growth to achieve the full-year estimate, which saw a modest revision upwards on Friday. The government’s second advance estimates now peg 2024-25 growth at 6.5 percent. Though government expenditure and investments are likely to grow slower than last year, private consumption is expected to increase 7.6 percent this year compared to 5.6 percent in 2023-24.
Despite the sluggish first half, the government anticipates a revival in economic activity in the second, led by an uptick in agricultural and industrial output. While rural demand seems resilient for now, urban consumption has been subdued due to moderate wage and credit growth. The recent cuts in income tax and interest rates are expected to spur consumption next year, adding an estimated 0.2 percent to the GDP. While manufacturing is witnessing a slowdown, construction is likely to register the highest growth rate of 8.6 percent, followed by finance, real estate and professional services. The services sector is projected to turn in 7.3 percent, clearly below its potential.
As Nageswaran noted, India is at a kissing distance from the $4-trillion club. But we need to grow much faster to achieve the ambitious target to be a high-income economy by 2047. Between 2000 and 2024, India’s growth averaged 6.3 percent, with its share in the global economy doubling from 1.6 percent to 3.4 percent. According to the World Bank, it must grow at an average of 7.8 percent for at least two decades and its per capita income needs to increase nearly eight times to be recognised as a developed economy. So it suggested faster reforms in the financial sector, and in land and labour laws beyond the structural reforms introduced in recent years. The government must encourage private investment, create jobs, increase labour-force participation and ensure sustainable economic growth. Only then can we assure a rise in wages—and a canter towards Viksit Bharat.