New Delhi, May 30, 2025:
India’s economy continued its upward trajectory in the final quarter of FY 2024-25, clocking a robust 7.4% growth in GDP, surpassing expectations and reaffirming its position as the world’s fastest-growing major economy. According to data released by the Ministry of Statistics and Programme Implementation (MoSPI), India’s full-year GDP growth stood at 6.5%, slightly lower than FY24’s 7%, but still a significant achievement amid global economic headwinds.
The January–March quarter’s performance was bolstered by a strong showing in manufacturing, construction, financial, and real estate services, with the Gross Value Added (GVA) growing at 6.8%. Meanwhile, the agricultural sector maintained stability despite earlier concerns, and private consumption rebounded, particularly in rural areas.
Sectoral Performance: Manufacturing and Construction Shine
The construction sector emerged as a key growth driver with a 10.8% increase in Q4, followed closely by public administration, defence, and other services, which grew at 8.7%. The financial, real estate, and professional services sector also performed well with a 7.8% expansion.
India’s primary sector, which includes agriculture, forestry, and mining, grew by 4.4% annually, and registered 5% growth in Q4, up from 0.8% a year earlier. However, trade, hotels, transport, and communication services grew at a slower pace, despite a festive Q4 marked by the Kumbh Mela and strong domestic travel.
Full-Year Growth: A Four-Year Low But Solid Recovery
Though FY25’s overall GDP growth of 6.5% is a four-year low, economists suggest that the headline number belies the underlying momentum. “Q4 GDP significantly beat expectations, demonstrating strong fundamentals and resilience,” said Rajani Sinha, Chief Economist at CareEdge Ratings. She highlighted that robust inventory management, government capital expenditure, and rural demand played key roles.
Despite a 4% contraction in central government capex during Jan-Feb 2025, prior Q3 investments continued to fuel economic activity in Q4, reflecting the lag effect typically observed in infrastructure projects.
Private Consumption and Investment Trends
Private Final Consumption Expenditure (PFCE) posted 7.2% annual growth, up from 5.6% in FY24. This improvement is largely attributed to healthy rural demand, aided by strong agricultural output, moderate inflation, and improved reservoir levels.
Conversely, urban demand remained muted due to subdued wage growth and concerns about job creation. Analysts expect the consumption gap to narrow as inflation continues its downward trend and RBI’s rate-cut cycle gains momentum.
Inflation Outlook: Easing Pressures Offer Support
Inflation trends are turning favourable. CPI inflation is forecast to average around 4% in FY26, with food prices stabilizing due to record wheat production and healthy rabi and kharif arrivals. Crude oil price moderation has also contributed to disinflation, and inflation expectations among households have dropped.
The Reserve Bank of India (RBI), in its April policy review, projected inflation at 4.0% for FY26, with quarterly estimates ranging from 3.6% to 4.4%. RBI Governor Sanjay Malhotra noted that these benign conditions could provide room for further rate cuts to support growth.
Capital Expenditure and the Policy Outlook
One concern remains the slowdown in government capital expenditure, which grew by only 0.8% during April–February FY25, compared to an average of over 30% in the previous three years. Economists including DK Srivastava from EY India emphasize the need for reviving fiscal momentum alongside monetary easing to safeguard India’s growth trajectory.
“India must leverage both its fiscal and monetary policy tools to sustain 6.5%+ growth in FY26,” Srivastava said. This includes resuming the repo rate reduction cycle, currently paused due to earlier inflationary pressures.
Comparative Perspective: India vs. China and the Global Landscape
While India posted a strong 7.4% Q4 GDP growth, China recorded a 5.4% expansion in the same period, reaffirming India’s lead among major global economies. India’s nominal GDP is estimated to have reached ₹330.68 lakh crore in FY25, marking a 9.8% increase over the previous year. In terms of GVA, the economy reached ₹171.87 lakh crore, growing by 6.4%.
According to the International Monetary Fund (IMF), India’s nominal GDP is projected to touch $4.2 trillion in 2025, overtaking Japan to become the world’s fourth-largest economy, behind only the US, China, and Germany. The IMF also predicts India will climb to third place by 2028, surpassing Germany.
Viksit Bharat 2047: Manufacturing the Key Pillar
Looking ahead, manufacturing will be a cornerstone of India’s development vision. NITI Aayog CEO B.V.R. Subrahmanyam stated that India must boost manufacturing growth to 15% annually to achieve a 25% contribution to GDP by 2047, aligning with the Viksit Bharat roadmap.
Currently, the manufacturing sector contributes around 17% to India’s GDP. If India’s GDP reaches $30 trillion by 2047, manufacturing is expected to account for $7.5 trillion, creating vast employment and export potential.
Outlook for FY26 and Beyond
Multiple agencies, including Crisil, EY, and JP Morgan, forecast India’s real GDP growth to hover around 6.2–6.5% in FY26, assuming continued disinflation, policy support, and normal monsoons.
However, external risks remain. These include geopolitical uncertainties, volatile commodity markets, and a slowdown in global trade. The US recently postponed the imposition of reciprocal tariffs on Indian exports for 90 days, but the long-term trajectory of global trade policy remains uncertain.
Still, with its demographic dividend, digital innovation, and macroeconomic stability, India is well-positioned to sustain high growth over the coming decades.
India’s economic engine is not just running — it’s accelerating. As policymakers balance short-term volatility with long-term ambitions, the next few years will be critical in determining whether India can realize its vision of becoming a global economic superpower.
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