India’s economy demonstrated resilience with a GDP growth of 6.2% year-on-year for the October-December quarter (Q3) of the financial year 2024-25, as reported by the National Statistics Office (NSO) on February 28, 2025. This marks a rebound from the previous quarter, where it had dropped to 5.4%, and aligns with economists’ expectations for the quarter.
The growth surge can be attributed to increased government spending and substantial private consumption expenditure, particularly benefited by favorable monsoon conditions. Government expenditure, which saw an impressive rise of 8.3%, provided strong support to the economy, compared to only 3.8% growth reported for the preceding quarter.
Chief Economic Adviser (CEA) V. Anantha Nageswaran observed, “The tax cuts announced in the Union Budget 2025 will play a central role in enhancing India’s medium-term economic prospects.” He pointed out the importance of not focusing solely on reciprocal tariff headlines but also acknowledging how softer crude oil prices could potentially buffer India against external shocks.
Private consumer spending expanded by 7.6%, significantly improving from 5.9% observed previously, indicating heightened demand driven by festival shopping and improved rural economic conditions. These figures contributed to the government’s upward revision of the full-year GDP growth forecast for FY25 to 6.5%, up from the earlier estimate of 6.4%.
Sector-wise performances were noteworthy, with construction leading at 8.6% growth, followed by financial, real estate, and professional services at 7.2%. Trade, hotels, transport, and communication services also reported growth at 6.4%. These numbers highlight not only the resilience but also the significant recovery of sectors following recent economic challenges.
Despite these encouraging figures, investment demand has been characterized as the weakest it has been for seven quarters. Analysts, including Rajani Sinha, Chief Economist at CareEdge Ratings, have noted, “The agriculture sector showed strong growth of over 5%, but the manufacturing sector still struggles, reflecting only mild improvement following the second quarter’s poor performance.” This situation highlights the necessity for increased investments to sustain growth momentum.
The Reserve Bank of India (RBI), forecasting economic trends for FY26, has projected GDP growth at 6.7%, with quarterly estimates stabilizing around 6.5% to 7%. Despite global uncertainties stemming from geopolitical tensions and trade deliberations, such as those involving US tariffs, there remains confidence within India’s domestic market.
Alongside GDP growth expectations, the RBI has implemented monetary policy adjustments, recently cutting the repo rate by 25 basis points to 6.25%. This rate cut, the first reduction in two years, signals the RBI’s intent to stimulate the economy, especially as inflation trends remain within manageable levels.
Inflation remains projected at 4.8% for FY25 and is expected to moderate to approximately 4.2% for FY26. These estimates allow room for continued consumer growth, underpinned by urban and rural demand, alongside sustained agricultural production.
Suvodeep Rakshit, Chief Economist at Kotak Institutional Equities, emphasizes the importance of observing both GDP and GVA growth metrics, highlighting sectoral performance and assessment of underlying growth drivers. The data reveal not just recovery but also the need for focused reforms to enable India to achieve its long-term economic goals of sustained higher growth rates.
With significant increases observed across various economic indicators, including capital expenditures planned at nearly the same levels as FY25, the expectation is built upon the necessity for India to ramp up investments and reforms continually. With the government hopeful about infrastructure projects amid the upcoming Maha Kumbh celebrations, this could spur additional growth and consumption.
Analysts unanimously agree on the need for heightened investment and capital expenditure from the private sector to maintain growth momentum, with rejuvenated demand conditions signaling opportunities for broader economic recovery. The latest GDP figures position India’s real GDP at ₹47.17 lakh crore for Q3 FY25, indicating not only recovery but optimism for the future of India’s economy, which stands out significantly compared to both advanced and developing economies.
Overall, the third-quarter GDP growth reflects India's economic resilience amid global uncertainties and challenges, pointing toward the potential for enhanced growth trajectories supported by government initiatives and strengthening consumer demand.