India's FY25 GDP Growth Slows to 6.5%, But Q4 Surprises With 7.4% Uptick

India’s economy may have slowed to a four-year low of 6.5% growth in FY25, but the final quarter of the fiscal delivered a pleasant surprise. The GDP for Q4 FY25 surged 7.4%, beating expectations and signaling resilience despite global headwinds.

While the slowdown in full-year growth compared to FY24’s 9.2% appears sharp, policymakers remain confident that India will retain its crown as the fastest-growing major economy in the world.

📊 FY25 Snapshot: The Numbers at a Glance

• Full-Year GDP Growth: 6.5%
• Q4 GDP Growth: 7.4% (Highest in the year)
• GVA Growth (FY25): 6.4%
• Private Consumption (YoY): Up 7.2%
• Agricultural Growth: 4.6% (FY25), 5.4% (Q4)
• Construction Growth: 9.4% (FY25), 10.8% (Q4)
• Manufacturing Growth: 4.5% (FY25), 4.8% (Q4)
• Retail Inflation (April): 3.16% — near 6-year low

🌐 What’s Behind the Slowdown?

The Indian economy grew at a healthy clip through most of FY25, but several external shocks dragged down full-year momentum:

• Global trade disruptions, especially those caused by Trump’s renewed tariffs and the Russia-Ukraine conflict, created volatility.
• Subdued private investment as companies remained cautious amid uncertain global conditions.
• Sluggish performance in key sectors like manufacturing, which grew at just 4.5% over the year, down sharply from 12.3% in FY24.

Despite these pressures, robust rural demand, higher government spending, and a resilient services sector helped keep the economy afloat.

📈 What Went Right in Q4?

The final quarter (January–March 2025) showed strong signs of revival:

• Industrial activity picked up, supported by increased infrastructure and construction output. • Agricultural output grew 5.4% YoY, indicating improved rural productivity. • Consumer spending bounced back, particularly during the festive season. • The construction sector grew by 10.8%, a significant jump from Q4 FY24.

JP Morgan had projected Q4 GDP growth at 7.5%, with GVA growth at 6.7% — estimates that were closely aligned with the actual print.

🧮 Inflation & Rate Cuts: Policy Winds Are Shifting

Amid easing food prices and a favorable monsoon forecast, retail inflation dropped to 3.16% in April, its lowest since 2019.

This gave the Reserve Bank of India (RBI) room to maneuver. In February 2025, the central bank cut the repo rate by 25 basis points — its first cut in five years. Analysts expect another rate cut in June, especially if inflation stays low.

Looking forward, the RBI projects 6.5% GDP growth for FY26, with CPI inflation expected to ease from 4.9% to 4.3%.

🌍 India vs the World: Still a Bright Spot

Even with the slowdown, India’s macroeconomic fundamentals remain solid:

• The IMF expects India to surpass Japan in economic size by year-end, touching $4.18 trillion. • A stable banking system, growing digital economy, and government schemes like PLI (Production Linked Incentives) continue to bolster manufacturing. • India’s limited reliance on global goods trade helps cushion external shocks better than many peers.

“India continues to benefit from strong service sector performance, controlled inflation, and improving manufacturing output,”
— Dr. Manoranjan Sharma, Chief Economist, Infomerics Valuations and Ratings

✅ Key Takeaways

• 📉 FY25 growth dipped to 6.5%, lowest since the pandemic period
• 🚀 Q4 GDP surprised at 7.4%, showing renewed momentum
• 🌾 Rural demand and agriculture played key roles in Q4 rebound
• 🏗️ Construction and services led the quarterly surge
• 🏦 RBI’s rate cut cycle has begun, with another cut likely if inflation stays low
• 🌎 India remains on track to become the third-largest economy, with IMF support

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