Indian Economy Poised for Strongest Growth in Four Quarters in Q4FY25: Poll

The Indian economy is set to register its fastest growth in four quarters during the January-March period of FY25, with GDP expected to rise by 6.9%, driven by robust consumer demand and a strong showing in agriculture, according to a Moneycontrol survey of 20 leading economists.

“Economic growth is projected to rebound in Q4FY25, supported by rising consumer spending, increased government expenditure, and solid agricultural output,” said Sakshi Gupta, Principal Economist at HDFC Bank.

Despite this quarterly surge, the full-year GDP for FY25 is estimated to fall short of the government’s second advance estimate of 6.5%, with economists projecting a 6.3% expansion. The government had needed a 7.6% growth in the final quarter to meet the target.

The Ministry of Statistics and Programme Implementation is scheduled to release the GDP figures for the fourth quarter along with provisional estimates for FY25 on May 30.

GDP vs GVA Discrepancy

While headline GDP growth is forecast to hit a four-quarter high, economists warn that the underlying economic momentum may not be as strong. Much of the expected boost in GDP is attributed to lower subsidy payouts, which artificially inflate net indirect taxes and widen the gap between GDP and Gross Value Added (GVA).

“While GDP may appear stronger, the actual growth is likely closer to 6.5%. A significant drop in government subsidy expenditure — as outlined in the Union Budget — is expected to raise net indirect taxes, thereby inflating GDP figures relative to GVA,” said Abhishek Upadhyay, Senior Vice-President and Economist at ICICI Securities Primary Dealership.

Sectoral Highlights

The rural economy is likely to perform well, further supporting private consumption. However, the manufacturing sector is expected to remain subdued, with listed non-financial companies posting earnings growth similar to the previous quarter.
“Manufacturing growth is expected to stay soft, as corporate profitability has not significantly improved from Q3,” said Gaura Sengupta, Chief Economist at IDFC First Bank.

Industrial production in FY25 has slowed to 4.1%, the lowest in four years, down from 6% in the previous fiscal. Infrastructure and construction goods output also decelerated to 6.7% from 9.9% in FY24, reflecting a cutback in capital expenditure by both central and state governments.

In the services sector, public administration is expected to witness a slowdown due to reduced revenue spending by governments. Real estate activity may also moderate, indicated by weaker stamp duty collections.

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Outlook for FY26 and Rate Cuts

Looking ahead, the Indian economy is projected to maintain a steady growth pace of 6.3% in FY26, matching FY25 levels. This outlook is slightly below the Reserve Bank of India’s estimate of 6.5%, but above the International Monetary Fund’s 6.2% forecast.

With inflation showing signs of easing, economists anticipate the RBI will implement its third rate cut of the year in June. The policy rate has already been reduced from 6.5% at the beginning of 2025 to 6%.

Forecasts from the Moneycontrol poll for FY25 ranged between 6.2% and 6.4%, with a median estimate of 6.3%, indicating cautious optimism amid global headwinds and domestic sectoral imbalances.