Modi’s-Economic

GDP Growth Slows to 6.4%: Can Modi’s New Strategy Revive India’s Economy

 

India’s economy is losing momentum as the government forecasts a GDP growth rate of 6.4% in 2024-25, its weakest in four years. This has come after a year of growth has been dragged down by investment and manufacturing sectors. Corporate profits and other economic measures weakened in the second half of 2024, raising doubts about Prime Minister Narendra Modi’s growth strategy.

The benchmark Nifty 50 index declined by 12% between September and November and then rose by 8.7% by the end of the year – far from the 20% increase recorded for the same period last year.

 

Demands for Lower Rates Intensify

 

Currently, decision-makers in political and business circles are calling on the government to relax monetary and fiscal restraints to stimulate growth. Madhavi Arora, chief economist at Emkay Global Financial Services, stressed the need to “revive the animal spirit” and increase consumer spending. “You have to revive the animal spirit, and you also have to ensure that consumption picks up. It's not that easy,” she said.

Among the proposals to spur growth is the cutting of taxes and tariffs to put more money in customers’ pockets. During consultations with economists and industry representatives, Finance Minister Nirmala Sitharaman is expected to announce measures in the February 1 budget.

 

Leadership Change at the Central Bank Suggests Growth Focus

 

Indian Prime Minister, Narendra Modi surprised the world by appointing Sanjay Malhotra, the new central bank governor and succeeding Shaktikanta Das in December. India’s growth slowed to 5.4% in the September quarter and Malhotra, who has pushed for growth over price stability, stepped in.

During the pandemic, Modi increased infrastructure spending and watched wasteful expenditure in check. This propelled headline GDP numbers, but it didn’t help annual wage growth or consumption.

 

Pressure built from Global Trade Challenges

 

India’s economy is also being pressured by global trade uncertainty — mainly under then probable Donald Trump’s second term. To prevent the associated tariffs, analysts suggest tariff rationalization and proactive trade policies for India to fully participate into the global value chains.

Sachin Chaturvedi of Research and Information System for Developing Countries highlighted the most urgent measures and said,India should announce some proactive measures for US suo-moto to bring concessions for the US rather than waiting for the new administration to announce their steps.

As the rupee keeps sliding and the threat of slowdowns loom, India must straddle domestic reforms with strategic international greases to keep the growth and confidence machine churning.