The Indian economy is projected to grow at its slowest pace in four years in the 2024-25 financial year on the back of weaker consumption and muted exports, with pressure building on the Reserve Bank of India (RBI) to cut interest rates.

Real or inflation-adjusted gross domestic product (GDP) rose 6.4% in the 2025 fiscal, according to the first advance estimates released by the ministry of statistics on Tuesday, compared to a provisional estimate of 8.2% growth in the previous year.

The RBI had lowered its growth projection for the current financial year to 6.6% from 7.2%.

The slower expansion of Asia’s third largest economy comes in the wake of higher interest rates amid elevated inflation, especially of food commodities.

The central bank has kept the repo rate steady for nearly 18 months after raising it by 250 basis points to 6.5% between May 2022 and February 2023. A basis point is one-hundredth of a percentage point.

GDP, the most widely used measure of national income, is the sum of all goods and services produced in the economy. The central bank will have to look to moderate sustained higher interest rates, which tend to hurt growth, analysts said.

“Real GDP has been estimated to grow by 6.4 per cent in FY 2024-25 as compared to the growth rate of 8.2 per cent in Provisional Estimate (PE) of GDP for FY 2023-24. Nominal GDP has witnessed a growth rate of 9.7 per cent in FY 2024-25 over the growth rate of 9.6 per cent in FY 2023-24,” the Ministry of Statistics & Programme Implementation said in an official release.

The Centre said an expansion in agricultural and industrial activity and an uptick in rural demand in the second half of FY25 will push growth towards the 6.4-6.8% range.

The agriculture sector, which contributes nearly 18% to GDP, showed a robust performance, growing 3.8% in FY25 from a mere 1.4% in the previous year. A base effect is partly responsible for the higher farm growth.

The base effect, which was at play, is a statistical outcome that makes any economic value, such as GDP or inflation, appear high if it had been compared to a previous corresponding period when the value was too low and vice-versa.

The economy’s gross value added (GVA) is projected to grow at 6.4% compared to 7.2% in the previous fiscal. GVA subtracts indirect taxes and subsidies from output to give a more clearer picture of economic growth.

The data come against the backdrop of rising economic uncertainties and geopolitical risks, which prompted some economists to already downgrade their full-year projections and call on the central bank to begin cutting interest rates.

Calls for lowering the repo rate grew louder after the growth slowed to a seven-quarter low during July-September of FY25, data released by the statistics and programme implementation ministry showed on November 29.

Last quarter’s growth was dragged down by a dip in government spending due to the general elections held in May. Government consumption in that quarter declined 0.2% from a year ago, after rising 0.9% in the previous three months.

“This had a bearing on the full-year projections,” said Abhishek Agrawal, an analyst with Comtrade.

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