With India’s GDP data for October-December 2024 (Q3FY25) to be released today (February 28), economists said that the country’s economic growth is expected to have picked-up in the third quarter, driven by improved rural consumption following a good monsoon and increased government spending. The National Statistics Office (NSO) will announce both FY2024-25 GDP as well as Q3GDP estimates today at 4 pm.
According to Financial Express, based on a median of 16 estimates by economists, India’s economy likely grew by 6.3 per cent in October-December, up from 5.4 per cent in July-September, mainly due to a broad-based pick-up in economic activity. During the previous quarter, GDP growth had dipped to its lowest in seven quarters at 5.4 per cent. Per economists, this was attributed to weak urban demand and delayed government spending due to national elections the previous year. According to a Reuters poll, Q3FY25 GDP grew 6.3 per cent year-on-year, though still below the RBI’s 6.8 per cent projection.
Economic activity, as measured by gross value added (GVA) which is seen as a more stable measure of growth, is estimated to have gone up to 6.2 per cent year-on-year in October-December as compared to 5.6 per cent growth in the previous quarter. Real GVA had grown by 5.6 per cent in Q2 of the current fiscal over the growth rate of 7.7 per cent in Q2 of the previous financial year. Nominal GVA had witnessed a growth rate of 8.1 per cent in Q2FY25 over the growth rate of 9.3 per cent in Q2FY24.
On February 7, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) had announced that it has projected the real GDP growth for FY26 at 6.7 per cent, slightly higher than the revised estimate of 6.6 per cent for FY25. This was downgraded from 7.2 per cent in the December MPC meeting. While announcing the decision of the MPC meet, RBI Governor Sanjay Malhotra had said that the GDP growth for Q1FY26 is projected at 6.7 per cent; Q2FY26 at 7.0 per cent; Q3FY26 at 6.5 per cent; and Q4FY26 at 6.5 per cent.
Earlier in December, the RBI had projected India’s real GDP growth for Q3FY25 at 6.8 per cent and Q4 at 7.2 per cent.
What are the key expectations?
Economists estimated Q3 GDP growth to range between 5.8- 6.4 per cent, benefitting from enhanced government spending amid uneven consumption. Aditi Nayar, Chief Economist, Head-Research & Outreach, ICRA, said, “India’s economic performance in Q3 FY2025 benefitted from a sharp ramp-up in aggregate Government spending (Centre + state) on capital and revenue expenditure, high growth in services exports, a turnaround in merchandise exports, healthy output of major kharif crops etc., which would have buffered rural sentiment.” She further added that some consumer-focussed sectors saw a pick-up during the festive season, even while urban consumer sentiment continued to dip slightly. Other sectors such as mining and electricity too saw an improvement after weather-related challenges in the previous quarter.
According to Deutsche Bank, as reported by PTI, India’s economic growth is likely to bounce back in Q3 and is expected to rise to 6.2 per cent in the three-month quarter under preview. “We think the worst is over as far as India’s growth trajectory is concerned but, even with the improvement of momentum, overall GDP growth is likely to remain below the potential growth rate of 7 per cent in FY26,” the bank’s analysts maintained.
Mahendra Patil, Founder and Managing Partner, MP Financial Advisory Services LLP, said, “India’s GDP growth in Q3FY2025 is expected to show an upward bias and is expected to be in the range of about 6.3-6.4 per cent, primarily driven by increased government spending and improved household consumption during the festive season. Government capital expenditure surged to Rs 2.7 trillion, marking about a 30 per cent increase compared to the average of the first two quarters which was a bit muted due to general elections. This boost was aimed at stimulating economic growth amid uneven household consumption trends.”
While long-term GDP sustainability depends on income growth, job creation, and private sector investment, Mahendra Patil added that the Q3FY2025 growth outlook remains positive, largely supported by public expenditure, conducive monsoon conditions leading to higher output in major Kharif crops, strong performance of the services sector, and services export.
However, Nomura forecasted the GDP growth for the period under review at 5.8 per cent. Aurodeep Nandi, India Economist & Executive Director, Nomura, said, “We expect GDP growth to disappoint in Q3 FY25 (October-December) at 5.8 per cent YoY, albeit up from 5.4 per cent in Q2 FY25, with GVA growth likely to rise to 6.0 per cent from 5.6 per cent, as shown by trends in our proprietary NIGHT (Nomura India Growth Thermometer). We expect consumption and government spending to improve, stable investments and a negative contribution from net exports.” Nomura estimated GDP growth of 6.0 per cent YoY in FY25 and 5.9 per cent in FY26.
Dr Manoranjan Sharma, Chief Economist, Infomerics Ratings, said, “The RBI projects GDP growth at 6.4 per cent in FY25 and 6.7 per cent in FY26, supported by improvements in agriculture and manufacturing. Inflation is expected to ease to 4.8 per cent in FY25 and 4.2 per cent in FY26. However, global uncertainties and volatile energy prices remain key risks. Given the evolving global challenges, our expectations align closely, forecasting GDP growth of 6.4 per cent and 6.7 per cent in FY25 and FY26, respectively.”