India’s economy has shown signs of recovery, recording notable growth as it rebounds from previous downturns. The country’s gross domestic product (GDP) growth accelerated to 6.2% year-on-year for the October-December quarter (Q3) of the current financial year 2024-25, as reported by the National Statistics Office (NSO) on February 28, 2025. This is up from the seven-quarter low of 5.4% recorded the previous quarter, demonstrating strengthening economic activity.
The Ministry of Statistics & Programme Implementation (MoSPI) highlighted, "Real GDP or GDP at constant prices in Q3 of FY2024-25 is estimated at Rs 47.17 lakh crore, against Rs 44.44 lakh crore in Q3 of FY2023-24, showing a growth rate of 6.2%." This bounce-back is especially significant against the backdrop of global economic uncertainties, which have been impacting growth trajectories worldwide.
India’s nominal GDP is pegged at Rs 84.74 lakh crore for Q3 of FY25 and reflects a growth rate of 9.9% from Rs 77.10 lakh crore in the same quarter last year. This figure indicates the effects of inflation coupled with increased spending. Aditi Nayar, Chief Economist at ICRA, pointed out, "The sequential uptick was led by a pickup in the growth of private and government consumption and a narrower drag on account of net exports, even as the growth of gross fixed capital formation eased marginally between these quarters."
Several sectors have contributed to this positive shift, particularly the agricultural and construction sectors which showed strong performance. Agriculture recorded a growth rate of 5.6%, supported by good monsoon conditions, which have improved rural consumption patterns. The construction sector also experienced growth of 7%, both of which are anticipated to significantly bolster the economy.
Conversely, the manufacturing sector has faced challenges, with growth slowing to 3.5% compared to 14% during the same period last year. This uneven growth raises concerns, particularly as weak urban demand continues to affect manufacturing and services sectors. Despite these challenges, the 'trade, hotels, transport, communication & services related to broadcasting' sector grew at 6.7%, though this was lower than the 8% growth noted last year.
The overall improvement has been fueled by increased consumer spending, particularly during the festive season and rising government expenditure. Government Final Consumption Expenditure (GFCE) rose significantly to 8.3% from 3.8% earlier, indicating commitment to stimulate growth through public spending.
Looking toward the future, the full-year outlook is optimistic, with the Indian economy projected to grow at 6.5% for the entire financial year of 2024-25. The growth rate reflects upward adjustments, particularly for sectors such as 'Financial, Real Estate & Professional Services' predicted to grow by 7.2%, along with private final consumption expenditure (PFCE) expected to register strong growth at 7.6%.
Madhavi Arora, Chief Economist at Emkay Global Financial Services, remarked on the dynamic nature of GDP forecasts, emphasizing, “Massive upward revisions to past years and quarters have made the GDP forecast exercise extremely dynamic.” She pointed out the potential for these figures to impact monetary policy, indicating, “We maintain achieving 6.5% growth in FY25 will require Q4 to print as high as 7.7% — a tall ask.”
Despite challenges, the growth figures indicate resilience within the economy and suggest the worst may be behind it. Gaura Sen Gupta, Chief Economist at IDFC First Bank, noted, “The improvement is led by a revival in rural demand and a rise in central government capital expenditure.” This points to positive sentiment among consumers, even as urban demand remains softer.
Analysts suggest this GDP growth is reflective of underlying issues yet to be resolved, as Deutsche Bank notes, “We think the worst is over as far as India's growth is concerned but overall GDP growth is likely to remain below the potential growth rate of 7%.”
Lessons from the third quarter affirm the direct link between government policies and economic outcomes, as previous delays surrounding government spending were resolved. The government's announcements earlier this year, including tax relief measures, have positively influenced disposable incomes and consumption patterns across rural and semi-urban segments.
The insights derived from this GDP report show not only the resolve within the Indian economy but also represent feedback from policymakers and economists concerning measures beneficial for sustaining this momentum. Overall, the latest figures depict optimism moving forward, but the need for vigilance remains as global conditions may pose both risks and opportunities.