India GDP Q4 FY25 Highlights: CEA Nageswaran Expects Tax Relief to Boost Urban Spending as Private Consumption Hits 2-Decade High

The Reserve Bank of India (RBI) estimated that the country’s economy to grow at 6.6% during Q4 FY25. All eyes are now on the upcoming RBI Monetary Policy Committee (MPC) meeting scheduled for June 6, where the central bank’s stance on interest rates will be closely watched. The decision is expected to align with the evolving GDP trajectory and macroeconomic conditions.

India's economy dropped to a seven-quarter low of 5.6% during the July-September period. However, it picked up in the next quarter and registered a 6.2% growth. In the Q1, India's GDP growth rate stood at 6.5%.

“India's economic trajectory remains resilient despite global headwinds and regional geopolitical tensions, including persistent border concerns with Pakistan. The projected real GDP growth of 6.4% in FY25 and 6.5% in FY26 reflects the economy's underlying strength and resilience, driven by robust domestic demand, sustained government capex, and gradual recovery in private investments," says Manoranjan Sharma, chief economist at Infomerics Valuations and Ratings.

"While external uncertainties—such as supply chain disruptions and energy market volatility—pose challenges, India continues to benefit from strong service sector performance, a stable banking system, and improving manufacturing output under schemes like PLI," he adds.

According to ICICI Bank, India’s real GDP during January-March 2025 is likely to have grown by 7%, marking a pick-up in growth momentum in the second half of FY25 compared to the first half. It has attributed the growth to strong rural demand, higher government spending, robust services exports and steady domestic travel.

Japanese brokerage firm Nomura said that India's economic growth is likely to pick up in the first quarter of 2025 to 6.7-6.8% as compared to 6.2% recorded in Q4. It has attributed this growth to be led by strong agricultural output and a broad-based expansion in services.

Last month, the IMF lowered its projection for India’s real GDP growth to 6.2% for FY26, a downward revision of 30 basis points from its January estimate. The forecast for FY27 has also been reduced by 20 basis points to 6.3%. On a global scale, the IMF expects growth of 2.8% in calendar year 2025 (down 50 basis points) and 3% in 2026 (down 30 basis points).

"Stable institutional flows- both FII and DII - are keeping the market steady even in the absence of positive triggers. The ongoing consolidation phase is likely to continue in the near-term. Investors should understand two distinct big trends that will weigh on markets: One, India’s macros are strong and improving. Two, this positive trend in macros is not getting reflected in corporate earnings. This is the fundamental reason for the range bound movement of the market. FY25 Nifty earnings growth was a pedestrian 5.5% and the projection for FY26 is around 10%. Valuation multiple of 21 for 10% earnings growth is certainly on the higher side. This will cap the upside to the Nifty until leading indicators suggest a recovery in earnings growth. At the same time, steadily improving macros like resilient GDP growth, down trending inflation and interest rates and declining fiscal and current account deficits lay the foundation for a strong economy and earnings recovery in the medium term. Investors should remain invested and buy quality stocks on dips," said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

India's Index of Industrial Production (IIP) growth decelerated to 2.7% in April 2025, down from 5.2% in April 2024 and 3.9% in March 2025. The slowdown was broad-based, with manufacturing and electricity output weakening sharply, and mining output contracting. Within manufacturing, several subsectors recorded negative growth compared to last year. Among use-based categories, capital goods, intermediate goods, and FMCG showed improvement, while other segments lagged.

India’s economy showed signs of recovery in the December quarter (Q3), expanding by 6.2% after slipping to a seven-quarter low of 5.6% in the July–September period. The last GDP data was released on February 28.

Leading credit rating agency ICRA expects India’s GDP to grow by 6.9% year-on-year in Q4 FY25, up from 6.2% in Q3 but well below the NSO’s implied estimate of 7.6% for the quarter. Gross Value Added (GVA) growth is projected to edge up slightly to 6.3%, supported by a modest rise in industrial activity (4.8% vs 4.5%) and steady performance in the services (7.5%) and agriculture (5.5%) sectors.

For the full fiscal year, ICRA pegs GDP growth at 6.3%.

“Both private consumption and trends for investment activity were uneven in Q4 FY2025, with the latter partly owing to tariff-related uncertainty. Services sector exports continued to show double-digit growth, while merchandise exports contracted in YoY terms in Q4 FY25 after expanding in Q3. While the robust increase in the output of most rabi crops is likely to have boosted the agri-GVA growth in Q4 FY2025, the tepid pace of expansion in the industrial volume growth as well as the deterioration in the performance of several service-sector indicators is expected to have weighed on the GVA growth of these segments,” said Aditi Nayar, Chief Economist, Head-Research & Outreach, ICRA.

“The declining inflation, favourable monsoon, monetary easing and strong rural demand are the major tailwinds for consumption demand growth in India. Consumption growth in FY24 declined to 5.6%; National Statistical Office (NSO) expects it to have grown 7.6% yoy in FY25 (9MFY25: 6.8% yoy). Ind-Ra expects PFCE to have grown 7.0% yoy in FY25 and believes consumption demand to remain stable in FY26 as well at 6.9%”, says Dr. Devendra Kumar Pant, Chief Economist and Head Public Finance, Ind-Ra.

World Economic Forum’s Chief Economists Outlook revealed that around 33% of surveyed global economists foresee strong growth in South Asia, the highest across regions, despite rising inflation and fresh regional tensions. It also expected India to be South Asia’s primary engine of growth in 2025 and 2026, with the International Monetary Fund forecasting.

Union Minister for Commerce and Industry Piyush Goyal on Thursday stated that India will remain the world's fastest-growing big economy for the next three decades.

“We are back on track, barring 3-4 months, on the growth trajectory. Hence, we are engaging in trade deals with the UK, EU, Chile and the USA. EFTA countries have committed $100bn in pureplay FDI in India. We are not aiming small,” Goyal said at the CII Annual Business Summit.

Goyal stated that the country has maintained a consistent growth rate of 6–7 percent and plans to increase it to "8%" at constant pricing. He noted that, despite global uncertainty, India remains one of the best-performing emerging markets

The Finance Ministry in its monthly economic review for March said that India's economic growth likely accelerated in the January-March period after sluggish performance in the previous two quarters, driven by improved export growth, a pick-up in government capital expenditure and impetus to economic activity associated with Kumbh Mela.

JP Morgan projected India's GDP growth for the January–March 2025 quarter at 7.5% year-on-year, with Gross Value Added (GVA) growth estimated at 6.7%, up from 6.2% in the previous quarter.

This acceleration is attributed to improved rural consumption and increased government spending, despite subdued private investments due to global uncertainties.

In the fourth quarter of FY 2024-25, real GDP stood at 7.4%, while Nominal GDP was recorded at 10.8%.

1. Real GDP has been estimated to grow by 6.5% in FY 2024-25. Nominal GDP has witnessed a growth rate of 9.8% in FY 2024-25.

2. In Q4 of FY 2024-25, real GDP and nominal GDP has been estimated to grow by 7.4% and 10.8% respectively.

3. ‘Construction’ sector is estimated to record a growth rate of 9.4% in FY 2024-25, followed by 8.9% growth rate in ‘Public Administration, Defence & Other Services’ sector and a 7.2% growth rate in ‘Financial, Real Estate & Professional Services’ sector.

4. During Q4 of FY 2024-25, ‘Construction’ sector has witnessed 10.8% growth rate, followed by 8.7% growth rate in ‘Public Administration, Defence & Other Services’ sector and 7.8% growth rate in ‘Financial, Real Estate & Professional Services’ sector.

5. Primary Sector has seen 4.4% growth rate as compared to growth rate of 2.7% observed in previous financial year. During Q4, FY 2024-25, this sector has observed 5.0% growth rate as compared to 0.8% growth rate in Q4 of previous financial year.

6. Private Final Consumption Expenditure (PFCE) has reported 7.2% growth rate during FY 2024-25 as compared to 5.6% growth rate in the previous financial year.

7. Gross Fixed Capital Formation (GFCF) has recorded 7.1% growth rate during FY 2024-25 and 9.4% growth rate in Q4, FY 2024-25.

On May 30, India lowered its FY25 nominal GDP growth estimate to 9.8% from 9.9% in the year ago.

The mining sector expanded by 2.5% in the January–March quarter of FY25, a notable increase from the 0.8% growth seen during the same period last year, according to government data. Meanwhile, the construction sector grew by 10.8%, up from 8.7% in the corresponding quarter of the previous fiscal.

"The GDP print for Q4 is higher than expected. This indicates that the economy has recovered from the slowdown seen in the middle of last year. The outlook for FY26 continues to face global headwinds on account of tariff uncertainties and global growth slowdown. We continue to expect GDP growth of 6.3% for FY26. This hinges on a continued recovery in domestic demand and support from both monetary and fiscal stimulus.

The Q4 growth was led by healthy agriculture performance, a sharp pick up in construction activity and continued steady performance in the services sector. On the other hand, while manufacturing activity showed some recovery, it still continued to remain fairly moderate.

Today’s print does little to change our view of the RBI policy next week where the central bank is expected to cut the policy rate by 25bps. Given global headwinds, the central bank is expected to remain growth supportive," said Sakshi Gupta, Principal Economist at HDFC Bank.

The ‘Construction’ sector has witnessed 10.8% growth rate, followed by an 8.7% growth rate in ‘Public Administration, Defence & Other Services’ sector and a 7.8% growth rate in the ‘Financial, Real Estate & Professional Services’ sector.

"India's Q4 FY2025 YoY GDP growth rose to an enviable 7.4%, higher than our above-consensus forecast of 6.9%, and exceeded the real GVA growth of 6.8%, boosted by net indirect taxes. With an upward revision in the pace of Q3 GDP expansion, led by agriculture, the full year GDP growth printed in line with the second advance estimate of 6.5%.

In Q4 FY2025, manufacturing, construction, financial real estate and professional services, and public administration, defense etc logged a healthier pace of growth relative to our projection.

In terms of the expenditure aggregates, the sequential uptick in GDP growth in Q4 FY2025 was led by gross fixed capital formation and lower drag from net exports, with services exports having accelerated appreciably in that quarter. However, private consumption growth eased, and likely remained uneven, while government final consumption expenditure contracted in Q4 FY2025, after a gap of two quarters.

Interestingly, discrepancies in H2 FY2025 are much larger than what was seen in H2 FY2024, and subsequent data revisions may entail a modification in growth of the expenditure side estimates," said Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA Limited.

India’s manufacturing growth slows to 4.8% in Q4 while services sector remains strong at 7.3%.

"A key positive is at an aggregate level, and for most sectors except manufacturing and mining, there is a reasonable continued growth from prepandemic levels. CAGR yoy growth from pre-pandemic levels of 5.3% from 5% last year indicates that there is a structural recovery that has set in. While not upto potential, but nevertheless the growth engine continues to roll," Anitha Rangan, Economist, Equirus Securities.

The primary sector has seen 4.4% growth rate as compared to growth rate of 2.7% observed in previous financial year. During Q4, FY 2024-25, this sector has observed 5.0% growth rate as compared to 0.8% growth rate in Q4 of previous financial year.

Real GDP or GDP at Constant Prices in Q4 of FY 2024-25 is estimated at Rs 51.35 lakh crore, against ₹47.82 lakh crore in Q4 of FY 2023-24, registering a growth rate of 7.4%. Nominal GDP or GDP at Current Prices in Q4 of FY 2024-25 is estimated at Rs 88.18 lakh crore, against Rs 79.61 lakh crore in Q4 of 2023-24, showing a growth rate of 10.8%.

"The private consumption growth moderated to a five-quarter low of 6.0% yoy in 4QFY25. It appears to be due to the slowing trend at the upper-end of the income ladder. The FMCG sales volume moderated in 4QFY25 with the urban areas showing a tepid growth of 2.6% yoy which was less than a third of that of the rural areas. In addition, the sharp decline in imports also points to slow spending done by the upper end income strata. Nevertheless, the personal consumption demand has held up well (3QFY23-3QFY25: 5.5% yoy) due to the gradual catchup and recovery in the income growth of the lower strata is correcting the skewness in consumption demand. The rural real wage growth (for agriculture) remained positive for the third straight quarter in 4QFY25. In fact, it averaged 3.7% yoy (January-February 2025 as per the latest data) which was the fastest pace of growth since 2QFY20." says Paras Jasrai, Economist at India Ratings & Research.

"The Gross Fixed Capital Formation has also printed at a strong 8.8%. Given that the government capex in FY25 has not grown significantly over FY24, it possibly reflects some growth momentum in private capex. Private consumption has printed moderately, and that reflects the risk averseness as well as pressures on household disposable incomes. This element of the GDP should fare better in the coming year with the tax concessions to salaried households. In summary, government consumption, investments, and a support lent by a strong agricultural output have helped the GDP give a strong print, but there are concerns to be addressed with the weaker manufacturing and private consumption growth," explains Ranen Banerjee, Partner and Leader, Economic Advisory, PwC India.

"Going forward we anticipate stronger GDP growth aided by improved agricultural output, sustained infrastructure activity, and strong domestic consumption. Continued government focus on public investment and structural reforms, are expected to catapult India’s growth momentum in FY2026," notes Hemant Jain, President, PHDCCI.

Chief Economic Adviser V Anantha Nageswaran has highlighted that strong domestic demand continues to support India's GDP growth, with private consumption’s share in GDP reaching its highest level since FY04. He noted that the country is well-placed for a steady growth trajectory with low inflation, aided by the possibility of interest rate easing, according to The Economic Times.

Nageswaran said that despite global economic uncertainty and an expected slowdown in global growth for 2025 and 2026, India has seen relatively smaller downward revisions to its growth forecasts.

He added that recent income tax relief measures are expected to further boost consumption, particularly in urban areas, during the current fiscal year, according to the report.

"We anticipate that consumption will remain robust in the current fiscal year, buoyed by favorable domestic factors such as normal monsoon patterns, the transmission of interest rate cuts by the Reserve Bank of India (RBI), and middle-class income tax benefits. These latter two factors are expected to bolster urban consumption and complement the strong rural demand. However, investment demand is likely to remain sluggish, as elevated uncertainty will dampen corporate investment appetite, and public investment is planned to grow at a slower rate compared to fiscal 2025," says Dharmakirti Joshi, Chief Economist at Crisil.