Perspective on GDP Data by Ms. Rajani Sinha, Chief Economist, CareEdge Ratings
Below the Perspective on GDP Data by Ms. Rajani Sinha, Chief Economist, CareEdge Ratings
“India’s GDP growth for the fourth quarter of FY25 came in at 7.4%, significantly exceeding expectations and signalling strong economic momentum. This brings full year FY25 growth to 6.5%, which is in line with the second advance estimate of MOSPI. The Q4 GVA growth stood at 6.8%, driven by a significant uptick in sectors such as manufacturing, construction, and financial, real estate, and professional services. Agricultural growth remained healthy despite moderation. Contrary to expectations, growth in the trade, hotels, transport, communication, and broadcasting services segment slowed, despite large-scale festivities such as the Kumbh Mela. On the expenditure side, private consumption remained healthy. Rural demand is expected to be supported by favourable agricultural output and easing inflation, while the outlook for urban demand remains mixed. Anecdotal evidence points to subdued wage growth, contributing to muted urban consumption. The recovery in manufacturing and construction was largely in line with expectations. It was likely supported by strategic inventory front-loading by firms in anticipation of reciprocal tariff measures and by strong government capital expenditure. Although central government capex contracted by 4% during January–February 2025, robust capex spending in Q3 helped sustain construction activity and GFCF in Q4, consistent with the typical lag between capex deployment and its economic impact.
The unevenness witnessed in the consumption recovery remains a critical monitorable going forward. The strength in rural demand is expected to continue on the back of favourable prospects for monsoon, healthy reservoir levels and upbeat agricultural output. However, the softness in urban demand continues to be an area of concern. On a positive note, inflationary pressures have been on a continued downward trajectory, particularly in the food category. Additionally, the consumption scenario is anticipated to gain on account of factors such as lower tax burden and RBI rate cuts. Though the US has put the reciprocal tariffs on a 90-day hold, we expect global economic uncertainty to persist going forward. This is likely to weigh on the private investment impulses. Given this context, a broad-based and durable consumption recovery along with the revival in government’s capex become increasingly critical for a revival in the private capex cycle. Factoring all of these aspects, we expect GDP growth to be at 6.2% in FY26.”
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