India’s GDP Grows 7.4% in March Quarter, FY25 Growth Slows to 6.5

Ira Singh
Khabar Khabaron Ki,31 May’25

India’s economy expanded by 7.4% in the March quarter (Q4FY25), marking a four-quarter high, but annual growth moderated to 6.5% for FY25 from 9.2% in the previous fiscal, according to official data released by the National Statistical Office (NSO) on Friday.

The Q4 GDP figure, though slower than the 8.4% growth recorded in the same quarter last year, surpassed economists’ expectations. A recent poll earlier this week had forecast GDP growth at 6.9% for Q4 and 6.3% for FY25.

“The Q4 growth print partly reflects the back-loaded spending effect of the government, both centre and states, led more by public capex spending,” noted Madhavi Arora, chief economist, Emkay Global. “As a whole, the growth has been in line with government estimates, with capital formation staying broadly steady.”

Chief Economic Advisor V Anantha Nageswaran noted the performance as resilient. “At real GDP growth of 6.5% for FY25, India outshines in view of other economies still recovering from Covid,” he said at a post-data press briefing.

Public and Private Investment Lift Growth
Investment demand remained strong, with gross capital formation rising 9.4% — a six-quarter high — driven by capex push from both the public and private sectors. According to Paras Jasrai, Associate Director at EY, “The seasonal rush to meet capex targets by the Union and state governments, along with increased private capex intentions, provided succour to investment demand in Q4FY25.”

Construction activity saw a sharp pick-up, growing 10.8% compared to 7.9% in the previous quarter and 8.7% in the same period a year earlier. Capital formation’s share in GDP rose to 33.9% in Q4 from 33.3% a year ago.

Sectoral Performance: Agriculture Outperforms, Manufacturing Lags
Agriculture posted robust growth of 5.4% in Q4, a significant improvement over 0.9% in the year-ago period, helping lift overall growth. The sector also registered its best annual growth in five years.

Manufacturing, however, remained tepid, expanding 4.8% in Q4 versus 11.2% in Q4FY24 — though better than the previous quarter.

Services, which make up a significant portion of GDP, remained steady, growing 7.3% in Q4 compared with 7.4% in Q3 and 7.8% a year earlier.

GVA Growth Trails GDP Amid Rising Tax Collections
Gross Value Added (GVA), a measure of economic activity excluding net taxes, grew by 6.8% in Q4 more modest compared to GDP growth. The divergence between GDP and GVA widened to its highest in four quarters, largely due to a sharp increase in net indirect taxes, which grew 12.7% in real terms and 22.7% in nominal terms year-on-year.

“The 4QFY25 GDP numbers are marginally higher than our expectations but broadly tracking the government’s earlier estimate,” Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank, reportedly stated. “Expectedly, the high net indirect tax growth has led to a wide gap between GDP and GVA.”

India Outpaces China in Q1 2025
India’s March quarter growth also outpaced China, which recorded a 5.4% expansion in the January–March 2025 period. The data underscores India’s continuing strength as one of the fastest-growing major economies, bolstered by infrastructure spending and relative macroeconomic stability.

Outlook for FY26:Momentum to Continue
Looking ahead, economists expect growth to hold steady despite external uncertainties. A recent poll projects India’s GDP to grow 6.3% in FY26, with inflation expected to ease to around 3.7%, providing further support to domestic consumption and investment.

“While global risks remain, the underlying momentum in investment and services, along with a stable inflation outlook, sets the stage for continued economic resilience,” said Arora.