Economy sprints in final qtr of FY25

Beating expectations, GDP expands 7.4% in Q4 to meet annual growth estimates of 6.5%

- ASIT RANJAN MISHRA

India's economic growth rebounded to a four-quarter high of 7.4 per cent in the January-March period of 2024-25 (FY25), aligning with the annual growth estimate of 6.5 per cent, according to provisional estimates of gross domestic product (GDP) released by the National Statistics Office (NSO).

The final-quarter performance outpaced expectations, beating both the Reserve Bank of India's (RBI's) forecast of 7.2 per cent and a Reuters poll of economists that had projected 6.7 per cent growth.

Nominal GDP for the full financial year rose 9.8 per cent to ₹330.7 trillion, slightly above the ₹324.1 trillion estimated in the Union Budget. This boost helped the government perform marginally better on fiscal deficit, which stood at 4.77 per cent of GDP in FY25, against the revised estimate of 4.84 per cent.

Gross value added (GVA) grew at a slower rate than GDP—at 6.8 per cent—in the March quarter, widening the gap between GDP and GVA due to a surge in net taxes (taxes minus subsidies), as government subsidy payouts contracted during the period.

Now, economists believe uncertainty because of the tariff war triggered by US President Donald Trump's policies and weak urban demand will shape India's FY26 growth outlook, even as further policy rate cuts by the RBI will support economic recovery.

Growth in the private final consumption expenditure (PFCE), which is taken as a proxy for consumption demand in the economy, outpaced gross domestic product (GDP) growth in 2024-25 (FY25), even as the consumption demand slowed to a five-quarter low in the fourth quarter (Q4) of the financial year.