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The National Statistical Office (NSO) released provisional estimates (PE) of the annual growth statistics for the Indian economy, last Friday. The data indicates that the Indian economy grew at a rate of 7.4% (real GDP) in 4QFY25 and at a rate of 6.5% for the full year FY25.

The key highlights of the growth data could be listed as follows:

FY25 Growth

Real GDP: Estimated at ₹187.97 lakh crore at constant (2011-12) prices.

Growth rate: 6.5% compared to ₹176.51 lakh crore in FY 2023-24 (8.2% growth in FY24).

Nominal GDP: Estimated at ₹330.68 lakh crore.

Growth rate: 9.8% compared to ₹301.23 lakh crore in FY 2023-24.

Real Gross Value Added (GVA): Estimated at ₹171.87 lakh crore at constant prices.

Growth rate: 6.4% compared to 7.2% in FY 2023-24.

Nominal GVA: Growth rate: 9.5% compared to 8.5% in FY 2023-24.

Quarterly GDP Estimates for Q4 FY 2024-25 (January-March 2025)

Real GDP: Estimated at ₹51.35 lakh crore at constant prices.

Growth rate: 7.4% compared to ₹47.82 lakh crore in Q4 FY 2023-24.

Real GVA: Estimated at ₹45.76 lakh crore at constant prices.

Growth rate: 6.8% compared to Q4 FY 2023-24.

Observations

The 6.5% real GDP growth in FY25 is lower than the 8.2% recorded in FY24, reflecting a slowdown attributed to factors like reduced government capital expenditure and sluggish private investment.

The Q4 FY25 growth of 7.4% indicates a rebound from the 5.4% growth in Q2 FY25, driven by strong performances in manufacturing, construction, financial services, and agriculture, supported by a good monsoon and easing inflation.

The agriculture sector’s improved performance (3.8% growth) is a notable positive, while manufacturing and mining sectors saw slower growth compared to FY24.

The estimates are provisional and subject to revision as more data becomes available, with the next update (Second Advance Estimates and Q3 FY25 data) scheduled for February 28, 2025.

Sectoral trends

In FY25, most sectors experienced slower growth in FY25 compared to FY24, contributing to the overall real GVA growth of 6.4% (down from 7.2%). The slowdown is attributed to a high base effect from FY24, reduced government capital expenditure, high interest rates, and global economic challenges.

Agriculture’s recovery (3.8%) and construction’s robust growth (9.4%) were key positives, supported by favorable monsoons and infrastructure investments, respectively. Q4 FY25 showed a rebound (6.8% GVA growth), indicating improving economic momentum.

Manufacturing (5.0%) and mining (4.2%) remained the key areas of concerns, reflecting industrial and external demand weaknesses. Trade and hospitality also saw moderated growth due to cautious consumer behavior.

Agriculture, Livestock, Forestry, and Fishing

Growth Rate: 3.8% in FY25 (up from 1.4% in FY24).

Farm sector recorded a significant recovery compared to the previous year’s low growth. The improvement is primarily driven by favorable monsoon conditions, which boosted agricultural output. Enhanced livestock and fishery activities also contributed. The sector’s resilience is notable, as it supports rural economies and overall food security, despite challenges like fluctuating global commodity prices.

The growth trend also indicates better crop yields and government support through schemes like minimum support prices (MSP) and rural infrastructure investments.

Mining and Quarrying

Growth Rate: 4.2% in FY25 (down from 7.1% in FY24).

Mining sector experienced a notable slowdown, reflecting reduced demand for minerals and challenges in global commodity markets. Domestic factors like regulatory constraints and environmental clearances may have also impacted mining activities.

The decline suggests a moderation in industrial demand for raw materials, potentially linked to slower manufacturing growth and global economic uncertainties.

Manufacturing

Growth Rate: 5.0% in FY25 (down from 9.9% in FY24).

Manufacturing growth decelerated significantly, driven by weaker domestic and export demand, high input costs, and supply chain disruptions. The sector faced challenges from elevated interest rates and stricter lending norms, which constrained industrial expansion.

However, despite the slowdown, manufacturing showed some recovery in Q4 FY25, contributing to the overall GDP growth of 7.4% for that quarter. Government initiatives like "Make in India" and production-linked incentives (PLI) continue to support the sector, but external pressures limited growth.

Electricity, Gas, Water Supply, and Other Utility Services

Growth Rate: 7.5% in FY25 (down from 7.8% in FY24).

The utilities sector maintained relatively strong growth, though slightly lower than the previous year. Steady demand for electricity, driven by industrial and domestic consumption, and investments in renewable energy supported this performance. Water supply and utility services also contributed positively.

The marginal decline reflects stable but not exceptional growth, with ongoing infrastructure investments in clean energy and utilities providing a foundation for resilience.

Construction

Growth Rate: 9.4% in FY25 (down from 10.4% in FY24).

Construction remained a robust performer, driven by government-led infrastructure projects, urban development, and real estate demand. The slight slowdown from FY24 is attributed to reduced government capital expenditure compared to the previous year’s high base.

The sector’s strong growth underscores its role as a key driver of economic activity, supported by initiatives like the National Infrastructure Pipeline and housing schemes.

Trade, Hotels, Transport, Communication, and Broadcasting

Growth Rate: 6.1% in FY25 (down from 7.5% in FY24).

This sector saw a moderation in growth due to weaker performance in trade and hospitality, impacted by reduced consumer spending in certain segments and global trade slowdowns. Transport and communication services, however, benefited from digital infrastructure investments and logistics improvements.

The decline reflects challenges in discretionary spending, though digital services and logistics provided some cushion.

Financial, Real Estate, and Professional Services

Growth Rate: 7.3% in FY25 (down from 8.4% in FY24).

This part of the services sector maintained solid growth, driven by financial services (banking, insurance) and real estate, supported by urban demand and digital financial inclusion. Professional services, including IT and consulting, continued to perform well, though export-oriented IT services faced global headwinds.

The slight decline from 8.4% to 7.3% reflects global economic uncertainties affecting IT exports, but domestic financial services remained a strong contributor.

Public Administration, Defense, and Other Services

Growth Rate: 7.8% in FY25 (down from 7.9% in FY24).

This public services sector showed steady growth, driven by government spending on public administration, defense, and social services. The marginal decline reflects a normalization from FY24’s high growth, with fiscal constraints limiting expenditure growth.

The sector’s consistent performance (7.8%) highlights the prominent role of government spending in stabilizing economic growth, particularly in Q4 FY25.

More on Growth trends tomorrow.

Recently the Ministry of Statistics and Program Implementation, Government of India, released the results of the latest Annual Survey of Industries (ASI) for the reference period FY23. The Annual Survey of Industries is conducted with the primary objective to provide a meaningful insight into the dynamics of change in the composition, growth and structure of various manufacturing industries in terms of output, value added, employment, capital formation and a host of other parameters.

I note the following key points from the survey results.

Key statistics (five-year period from FY19 to FY23)

·         Number of total factories in the country has grown at a CAGR of 1.2%, despite the government’s strong emphasis on manufacturing and multiple incentives.

·         Total fixed capital (investment) employed in manufacturing has recorded a growth of 4.4% CAGR. Total invested capital has grown at a CAGR of 6.5% during this period, implying higher working capital requirement.

·         Total employment in the manufacturing sector has grown at a CAGR of 3.2%. This is sharply lower than the rise in the labor force.

·         Total factory output has risen at a CAGR of 11.8%, while output per worker recorded a growth of 4.8% CAGR.

·         Average industrial wage has grown at a CAGR of 5.1% against the average CPI inflation of 6.6%, implying sharp deceleration in the real wages.

·         The ratio of contract workers to the total workers has increased from 38% (FY19) to 41% (FY23).

·         Manufacturing productivity has shown some improvement, but this may be far below the desired levels. Fixed capital to output ratio has improved from 37% to 28%. GVA to fixed capital ratio improved from 44% to 53%. Wage cost to NVA improved from 36% to 34%.

Stark regional imbalances

Five states account for more than 52% of factories in the country. The nature of activities, productivity and employment level of the industry in these states also appear to be different.

·         Tamil Nadu accounts for 15.7% factories, deploying 7.9% of the total fixed capital, employs 15% of the total industrial workers and produces only 10.3% of GVA - implying more proportion of labor-intensive small industries.

·         Gujarat accounts for 12.2% factories, deploying 19.7% of the total fixed capital, employs 12% of the total industrial workers and produces 14.8% of GVA - implying dominance of heavy capital-intensive industries.

·         Amongst the top five industrial states, Uttar Pradesh is the least productive. The most populous state in the country accounts for only 7.5% of total factories, employs 8% of the total industrial worker and contributes just 6% of GVA.

Food business getting more organized

Factories producing food products, 16% of the total number of factories, are now the largest category of industrial units in the country. These factories employ 21,16,000 or 11.4% of the total industrial workers, more than any other industry. The traditional largest employer, textile industry, comes a distant second employing 17,23,000 workers.

Food products industry now contributes 7.1% of the manufacturing GVA, 73% more than the 4.1% contribution of the textile industry.

…but basic metal continues to dominate

Basic metals’ industry employs 17.6% of the total fixed capital, and contributes 11.6% of the GVA. The employment intensity of the Basic metal industry is low as it employs only 7.6% of the industrial workers.

Last week, the National Statistical Office (NSO) released the outcome of the latest Annual Survey of Industries (2021-2022). The survey results provide important insights into the current state of the Indian industry. Some key highlights of the survey results are as follows:

·         Growth: The year 2021-22 witnessed a sharp rise in level as well as in the growth of the majority of the important economic parameters like invested capital, input, output, GVA, net income, and net profit registered by the sector and even surpassed the pre-pandemic level in absolute value terms.

·         The main drivers of this growth in 2021-22 were industries like the Manufacture of Basic metal, Coke & Refined Petroleum Products, Pharmaceutical Products, Motor vehicles, Food Products and Chemical and Chemical products. These industries, taken together, contributed about 56% of the total GVA of the sector and showed GVA growth of 34.4% and output growth of 37.5% in comparison to 2020-21.

·         Employment: The estimated number of persons engaged in this sector in 2021-22 has exceeded the pre-pandemic level (that is 2018-19) by more than 9.35 lakh. The top five states employing the highest number of persons in manufacturing were Tamil Nadu, Gujarat, Maharashtra, Uttar Pradesh, and Haryana.

·         Wage Growth: Average emoluments also registered an increase with the average salary earned per employee in this sector had gone up by 1.7% in 2020-21 and by 8.3% in 2021-22 in comparison to the respective previous years.

·         Regional dispersion: The top five states, taken together, contributed about 53% of the total manufacturing GVA of the country in 2020-21 as well as in 2021-22. Gujarat remained at the top in 2020-21 and in the second position in 2021-22 while Maharashtra ranked first in 2021-22 and second in 2020-21. These two states were followed by Tamil Nadu, Karnataka, and Uttar Pradesh in both years.

·         Key produce: Food (16.35%), Non-metal minerals (11.87%), Textile (6.86%), Fabricated Metal (6.44%), Rubber and Plastic products (6.01%) were the top category of operational factories.

·         No. of factories: There was a total of 2,00,576 operational factories in India at the end of FY22. About 49400 or about one-fifth of the total factories were inoperational. About 51% of the total operational factories were in the top 5 states – Tamil Nadu (15.76%); Gujarat (11.63%), Maharashtra (10.16%), Uttar Pradesh (7.03%), and Andhra Pradesh (6.24%). Gujarat factories were the most capital-intensive (18.43% of total fixed capital).

·        
Debt: Manufacturing units had a total of Rs13971 billion loan outstanding at the end of FY22. The average interest cost of these loans was 11.7%.