India’s economic growth in Q4 beat estimates after accelerating to 7.4 per cent but it couldn't save the economy from posting its slowest growth since Covid-era in FY25. The economy in 2024-25 hit a four-year low of 6.5 per cent, slowing down sharply from the 9.2 per cent growth recorded in FY24.
Nonetheless, New Delhi’s key officials have backed India’s growth potential and vouched that the country will retain its title as the fastest-growing major economy in the world.
The full-year growth remained within official projections, as private investment remained subdued amid global uncertainties.
In the quarter ending March 31, 2025, India’s growth stood was fastest in the four quarters, on the back of robust industrial activity and sustained global trade tensions grew larger by day.
The third quarter had seen growth rise to 6.2 per cent, revised upward from an earlier estimate of 5.6 per cent, showing resilience amid global headwinds.
The fourth quarter was marred by global trade disruptions led by Trump’s tariffs and escalation of the Russia-Ukraine war. However, the Indian economy powered through the storm on the back of pick up rural demand and healthy government spending.
Moreover, the latest growth figures continue to keep New Delhi in the race of fastest economies in the world. The International Monetary Fund (IMF) also expects India’s economic size to surpass Japan’s by the end of the year, reaching $4.18 trillion.
A notable divergence between GDP and gross value added (GVA) was expected with the latter stripping out taxes and subsidies for a clearer picture of underlying economic activity. The GVA stood at 6.4 per cent.
JP Morgan, for instance, estimated March quarter GDP growth at 7.5%, but GVA growth at a more modest 6.7%.
Private consumer spending jumped 7.2 per cent YoY, up from 5.6 per cent in the previous financial year, buoyed by improved rural demand due to moderating food prices and higher spending during the festival season compared to a year earlier.
Agricultural growth accelerated to 4.6 per cent YoY in FY25, a significant rise from 2.7 per cent in the previous year. In Q4FY25, farm activity grew 5.4 per cent, up from 0.9 per cent a year ago.
The construction sector grew at 9.4% YoY, marking an increase from the 10.4% growth seen in the prior year. Meanwhile, for the quarter ended on March 31, 2025, the said sector grew by 10.8 per cent as against 8.7 per cent in Q4 FY24.
Manufacturing growth stood at 4.5% YoY, a decline from 12.3% in the previous year. In the fourth quarter manufacturing stood at 4.8 per cent, down from 11.3 per cent in the year ago period.
Some analysts said that the higher-than-expected GDP print might be a reflection of a fall in government subsidies, which could inflate the headline number without reflecting equivalent real economic momentum.
Despite the external challenges, the Indian economy remains relatively healthy due to its limited reliance on global goods trade, recent tax cuts, controlled inflation and a potentially softer interest rate environment.
“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,” said Dr. Manoranjan Sharma, Chief Economist at Infomerics Valuations and Ratings Ltd.
In February 2025, the RBI had, for the first time in five years, cut the repo rate by 25 bps, a move expected to aid India’s growth blitz.
Retail inflation dropped to a near six-year low of 3.16% in April, and a favourable monsoon forecast is expected to help stabilize food prices—factors that could allow the Reserve Bank of India (RBI) to consider a rate cut in June.
Looking ahead, the RBI has projected 6.5% growth for the fiscal year beginning April 1, 2025.
“On the inflation front, CPI is expected to moderate from 4.9% in FY25 to 4.3% in FY26, aided by easing food prices, prudent monetary policy, and a normal monsoon forecast. However, inflationary risks persist because of global commodity prices and any escalation in geopolitical tensions,” said Sharma.
Nonetheless, New Delhi’s key officials have backed India’s growth potential and vouched that the country will retain its title as the fastest-growing major economy in the world.
The full-year growth remained within official projections, as private investment remained subdued amid global uncertainties.
In the quarter ending March 31, 2025, India’s growth stood was fastest in the four quarters, on the back of robust industrial activity and sustained global trade tensions grew larger by day.
The third quarter had seen growth rise to 6.2 per cent, revised upward from an earlier estimate of 5.6 per cent, showing resilience amid global headwinds.
The fourth quarter was marred by global trade disruptions led by Trump’s tariffs and escalation of the Russia-Ukraine war. However, the Indian economy powered through the storm on the back of pick up rural demand and healthy government spending.
Moreover, the latest growth figures continue to keep New Delhi in the race of fastest economies in the world. The International Monetary Fund (IMF) also expects India’s economic size to surpass Japan’s by the end of the year, reaching $4.18 trillion.
A notable divergence between GDP and gross value added (GVA) was expected with the latter stripping out taxes and subsidies for a clearer picture of underlying economic activity. The GVA stood at 6.4 per cent.
JP Morgan, for instance, estimated March quarter GDP growth at 7.5%, but GVA growth at a more modest 6.7%.
Private consumer spending jumped 7.2 per cent YoY, up from 5.6 per cent in the previous financial year, buoyed by improved rural demand due to moderating food prices and higher spending during the festival season compared to a year earlier.
Agricultural growth accelerated to 4.6 per cent YoY in FY25, a significant rise from 2.7 per cent in the previous year. In Q4FY25, farm activity grew 5.4 per cent, up from 0.9 per cent a year ago.
The construction sector grew at 9.4% YoY, marking an increase from the 10.4% growth seen in the prior year. Meanwhile, for the quarter ended on March 31, 2025, the said sector grew by 10.8 per cent as against 8.7 per cent in Q4 FY24.
Manufacturing growth stood at 4.5% YoY, a decline from 12.3% in the previous year. In the fourth quarter manufacturing stood at 4.8 per cent, down from 11.3 per cent in the year ago period.
Some analysts said that the higher-than-expected GDP print might be a reflection of a fall in government subsidies, which could inflate the headline number without reflecting equivalent real economic momentum.
Despite the external challenges, the Indian economy remains relatively healthy due to its limited reliance on global goods trade, recent tax cuts, controlled inflation and a potentially softer interest rate environment.
“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,” said Dr. Manoranjan Sharma, Chief Economist at Infomerics Valuations and Ratings Ltd.
In February 2025, the RBI had, for the first time in five years, cut the repo rate by 25 bps, a move expected to aid India’s growth blitz.
Retail inflation dropped to a near six-year low of 3.16% in April, and a favourable monsoon forecast is expected to help stabilize food prices—factors that could allow the Reserve Bank of India (RBI) to consider a rate cut in June.
Looking ahead, the RBI has projected 6.5% growth for the fiscal year beginning April 1, 2025.
“On the inflation front, CPI is expected to moderate from 4.9% in FY25 to 4.3% in FY26, aided by easing food prices, prudent monetary policy, and a normal monsoon forecast. However, inflationary risks persist because of global commodity prices and any escalation in geopolitical tensions,” said Sharma.
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