India’s GDP growth trends and investment impact

Source: The post India’s GDP growth trends and investment impact has been created, based on the article “What the recent GDP data revisions reveal” published in “The Hindu” on 13th March 2025

UPSC Syllabus Topic: GS Paper3- Economy- Growth and Development

Context: The article discusses India’s GDP growth trends based on NSO data. It explains quarterly growth variations, reasons for fluctuations, and investment impact. It highlights revised annual growth figures, challenges in achieving targets, and the importance of investment for long-term economic growth.

For detailed information on India’s Real Growth Rate and Forecast read this article here

How has India’s GDP growth performed in 2024-25?

1. India’s GDP growth rates for 2024-25 across four quarters were: 6.5%, 5.6%, 6.2%, and 7.6%.
2. The third-quarter GDP growth of 6.2% was an improvement from 5.6% in the second quarter.
3. Agriculture grew by 5.6%, while manufacturing remained weak at 3.5% despite slight improvement.
4. Services, including trade and hospitality, grew by 6.7%, up from 6.1% in 

Why did GDP growth slow down in the second quarter?

1. The fall in GDP growth from 6.5% to 5.6% in Q2 was due to lower private consumption.
2. The contribution of Private Final Consumption Expenditure (PFCE) fell from 4.3 to 3.3 percentage points.
3. Investment growth also declined, contributing only 2.0 percentage points, compared to 2.3 in Q1.

Is the fourth-quarter growth target of 7.6% achievable?

1. To achieve 7.6% GDP growth in Q4, PFCE must grow by 9.9%, which is historically high and unlikely.
2. Investment growth needs to contribute 2.1 percentage points, mainly from government spending.
3. The government has spent ₹7.57 lakh crore in capital expenditure up to January 2025.
4. To reach its revised estimate of ₹10.18 lakh crore, it needs to spend ₹2.61 lakh crore in February-March 2025.
5. Past data (2021-22 to 2023-24) shows an average expenditure of ₹1.81 lakh crore in these months, making the target difficult.

What do annual revisions say about India’s economy?

1. Real GDP growth was revised upwards for 2022-23 (7.6%), 2023-24 (9.2% (up from 8.2%)), and 2024-25 (6.5%).
2. GVA growth in 2023-24 was revised from 7.2% to 8.6%.
3. The biggest upward revisions were in manufacturing (+2.4 percentage points) and financial, real estate services (+1.9 percentage points).
4. The Gross Capital Formation (investment) fell from 10.5% in 2023-24 to 5.8% in 2024-25, affecting growth.
5. The Incremental Capital-Output Ratio (ICOR) for 2024-25 is 5.5, meaning more investment is needed for growth.

What are the growth prospects for 2025-26?

1. The Economic Survey estimates real GDP growth for 2025-26 in the range of 6.3%-6.8%, with a midpoint of 6.55%.
2. A 6.5% real GDP growth in 2025-26 is feasible if government investment remains strong.
3. Private investment needs more time to recover due to global uncertainties.
4. The overall nominal saving rate in 2023-24 was 30.7%, below the pre-COVID average of 31.2% (2015-16 to 2019-20).
5. The real investment rate (Gross Fixed Capital Formation to GDP) for 2024-25 is 33.4%.
6. Investment-led growth remains the best long-term strategy.

Question for practice:

Evaluate the impact of investment trends on India’s GDP growth in 2024-25 and its implications for 2025-26.