IQ4 FY25 (January-March 2025) GDP Growth: India’s economy grew by a strong 7.4%. This was higher than many expectations and a good acceleration from the previous quarter.
Full Year FY25 (April 2024-March 2025) GDP Growth: For the entire financial year, India’s GDP is estimated to have grown by 6.5%. While this is a robust growth rate, it’s considered a four-year low compared to the higher growth rates seen in the immediate post-pandemic years.
Nominal GDP Growth (Full Year FY25): This figure, which includes inflation, grew by 9.8% for the full year.
What these numbers tell us:
- Still the Fastest Growing Major Economy: Despite the full-year growth being a “four-year low,” India continues to hold its position as the fastest-growing major economy in the world. This indicates resilience amidst global economic uncertainties.
- Strong Q4 Performance: The 7.4% growth in the last quarter of FY25 shows a healthy momentum, beating the Reserve Bank of India’s (RBI) forecast of 7.2%. This positive trend is expected to carry into the current financial year (FY26).
Key Drivers of Growth (Sector-wise Performance in Q4 FY25):
- Construction: This sector showed impressive growth at 10.8%, indicating strong investment in infrastructure and building activities.
- Public Administration, Defence & Other Services: This segment also saw significant growth at 8.7%.
- Financial, Real Estate & Professional Services: This sector grew by a healthy 7.8%.
- Services Sector (overall): The services sector as a whole expanded by 7.3%, contributing significantly to the overall growth.
- Agriculture Sector: This vital sector sustained positive growth at 5.4%, a notable improvement from the previous year.
- Manufacturing: While still growing at 4.8% in Q4, it has seen a slowdown compared to previous years.
What contributed to this growth (Expenditure Side):
- Private Final Consumption Expenditure (PFCE): This is a key indicator of consumer demand and showed strong growth of 7.2% for the full year FY25, indicating a rebound in consumer spending, especially in urban areas and supported by improved rural demand.
- Gross Fixed Capital Formation (GFCF): This represents investment in the economy and registered a healthy recovery with 9.4% growth in Q4 and 7.1% for the full year. This suggests increased investment activity.
Important Considerations:
Outlook: Experts and government officials remain optimistic about India’s growth trajectory, expecting it to remain robust at around 6.5% in FY26. The economic momentum that picked up in Q4 is expected to continue.
Global Headwinds: The growth was achieved despite significant global challenges like geopolitical tensions, global trade uncertainties, and the potential impact of tariffs.
Fiscal Deficit: India’s fiscal deficit for FY25 met its target at 4.8% of GDP.
Inflation: The Chief Economic Advisor (CEA) noted that India is experiencing a “benign growth-inflation environment,” with retail inflation softening.