Mint Quick Edit | India’s GDP: A key test lies ahead
Last year’s 6.5% GDP growth was a dip from the Viksit Bharat path, but the economy’s recovery from the covid shock has been notable. Its learnings must feed future policy. Here’s what to track.
The fiscal policy-led rescue of India’s economy from the covid shock has been impressive, even though its pace of expansion slowed to 6.5% in 2024-25, as provisional data shows, after a three-year run averaging above 8.8%.
Last year’s rate of GDP growth dropped below the path demanded by Viksit Bharat, but the second half’s acceleration reveals a grip on its gear-stick held by the government through public expenditure. How long, though, will state support last?
Also Read: Kaushik Basu: Redefine prosperity; GDP tunnel-vision could prove costly
Last year’s fiscal gap was under 4.8% and this year’s 4.4% goal is achievable. After that, public debt will be adopted as the official gauge to constrain risky over-spending.
Also Read: It’s time to lay the great Indian GDP controversy to rest
Clearly, India’s Fiscal Responsibility and Budget Management (FRBM) law needs rework in the light of lessons from our economic recovery. How 2025-26 turns out may be instructive. If inflation stays subdued at around 4%, the central bank’s aim, even with the fiscal deficit exceeding the FRBM’s 3% cap, it’ll be a relief.
Also Read: The state of India’s economy is not as bright as GDP data may suggest
What happens to price stability if private investment and consumption regain full strength, however, remains untested. It’s a key test, as faster growth and lower debt require both these to form a robust mutually reinforcing loop.
topics
