Understanding India's GDP Growth Rate for Q3 2024-25

India's GDP Growth Rate for Q3 2024-25

India's real GDP experienced a growth of 6.2% during the October-December 2024 period. This represents an increase from 5.6% in the previous quarter but is lower than the remarkable 9.5% growth seen during the same period in 2023.

Comparison with Past Trends

The 9.2% GDP growth in 2023-24 marked the highest growth rate in the past twelve years, aside from the post-pandemic recovery of 2021-22. In stark contrast, the economy had faced a contraction of -5.8% in 2020-21 due to the adverse effects of COVID-19. Furthermore, the growth rate of 8.3% in 2016-17 was one of the highest prior to the pandemic.

Factors Contributing to GDP Growth in Q3 2024-25

• Government Spending: Increased by 8.3%, focusing on public infrastructure and welfare initiatives.
• Private Consumption: Grew by 6.9%, bolstered by rising consumer demand.
• Exports: Surged by 10.4%, a significant rise compared to the 3% growth in the previous year.

Main Challenges Affecting GDP Growth

• Lower Investment Rate: Gross Fixed Capital Formation (GFCF) growth slowed to 5.7% from 9.3% last year.
• Declining Imports: A 1.1% decline indicates weaker domestic demand and rupee depreciation.
• Slower Growth: The Q3 growth of 6.2% was 0.2 percentage points below the Reserve Bank of India's projection.

Key Macroeconomic Indicators Showing Recovery

• Higher GST Collections: Indicating improved business activity.
• Increased Public Spending: Focused on infrastructure and welfare schemes.
• Electricity Generation: Rising levels reflect industrial growth.
• Strong Export Performance: Enhancing the trade balance.

GDP Growth Target for 2024-25

The government's target for the full year is a 6.5% growth rate, necessitating a 7.6% growth in the fourth quarter to achieve this goal.

Conditions to Meet the 6.5% GDP Target

According to Chief Economic Adviser V. Anantha Nageswaran, three essential factors must align:

• Export Boom: Sustained double-digit growth in exports.
• Higher Capital Expenditure: An increase in both private and government investments.
• Strong Private Consumption: Festivals such as Maha Kumbh could stimulate spending.

Significance of GDP Growth Trends

• Economic Stability: Consistent GDP growth reflects resilience against global challenges.
• Investment Climate: Higher growth rates attract both foreign and domestic investments.
• Employment Generation: Sectors like infrastructure, exports, and manufacturing benefit from an increasing GDP.
• Policy Direction: Growth trends influence fiscal policies, interest rates, and welfare spending.

Frequently Asked Questions (FAQs)

Q1. What was India's GDP growth rate for Q3 2024-25?
Answer: India's GDP grew by 6.2% during the October-December 2024 period, an increase from the previous quarter but lower than the same quarter in 2023.

Q2. What factors contributed to the GDP growth in Q3 2024-25?
Answer: Major contributors included an 8.3% increase in government spending, a 6.9% rise in private final consumption, and a 10.4% surge in exports.

Q3. What challenges are affecting India's GDP growth?
Answer: Key challenges include a lower investment rate, declining imports, and growth that was below the Reserve Bank of India's projections.

Q4. What is the GDP growth target for 2024-25?
Answer: The government aims for a 6.5% growth rate for the year, requiring a 7.6% growth in the fourth quarter to meet this goal.

Q5. Why is GDP growth significant for the economy?
Answer: GDP growth indicates economic stability, influences investment decisions, generates employment, and guides fiscal policies.

UPSC Practice MCQs

Question 1: What was India's GDP growth rate in Q3 2024-25?
A) 5.6%
B) 6.2%
C) 7.5%
D) 9.5%
Correct Answer: B

Question 2: What percentage did government spending increase in Q3 2024-25?
A) 7.5%
B) 8.3%
C) 6.0%
D) 5.0%
Correct Answer: B