​Growing pains: Economic performance, Viksit Bharat

The data on India’s economic performance in 2024-25, released on Friday, have something for everybody. Those with an optimistic outlook can rejoice at the seemingly robust growth in the fourth quarter. Pessimists can despair over the four-year low annual growth figure. The realist’s assessment, however, is that there is cause for some restrained celebration, and more than a healthy dose of disappointment. The Q4 growth of 7.4% was considerably higher than what was expected for the quarter, and the fastest seen in an otherwise dismal financial year. The main drivers were the construction sector returning to double-digit growth, and the agriculture sector posting a strong showing. These are also two major employment drivers. Services, too, continued their steady and strong growth. The manufacturing sector, on the other hand, grew at just 4.8%, down from 11.3% in Q4 of the previous year. There is a reality check hiding in the aggregate numbers, as well. The GDP growth rate of 7.4% was achieved in large part due to a 12.7% growth in net taxes. This bump in tax collections provided a statistical boost without which growth in actual economic activity would have come in at around 6.8%. The much-hyped ‘Maha Kumbh effect’ on consumption expenditure also does not seem to have materialised. Growth in Private Final Consumption Expenditure in Q4 — the Kumbh quarter — came in at 6%, the slowest in five quarters. Capital formation, however, grew a robust 9.4% as the government finally sped up its sluggish capital investments.

Government officials and Union Ministers have expressed their satisfaction at the 6.5% growth in 2024-25, the slowest since the pandemic, saying it is still the fastest among major economies, and not bad in the context of a “growth-scarce” global environment. All of this is true. Yet, ‘not bad’ is not nearly good enough for India. The race is not with the rest of the world, but is an effort to keep pace with the country’s growing requirements. The Modi government, with its sights set on a ‘Viksit Bharat’ by 2047, must be held to a higher standard in line with its aspirations. If, as the Economic Survey points out, Viksit Bharat by 2047 requires “sustained economic growth of close to 8% every year for at least a decade”, then India is decidedly moving very slowly, even if in the right direction. In his press conference, Chief Economic Adviser V. Anantha Nageswaran said India was entering a phase of low inflation and stable growth. Stability can be good, since it implies lower chances of growth slowing. Yet, it also implies growth is unlikely to accelerate significantly either. The government needs to consider whether this is truly a satisfactory situation for a transitioning economy.