R. Suryamurthy
India’s once-robust economic recovery appears to be losing steam, with the country’s Gross Domestic Product (GDP) growth slowing to 6.5% in FY2024-25, the lowest in four years, according to official data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Thursday. This marks a sharp decline from the 9.2% growth rate recorded in the previous fiscal year, reflecting the mounting economic headwinds facing Asia’s third-largest economy.
While the January–March quarter (Q4 FY25) posted a GDP growth of 7.4%, exceeding the Reserve Bank of India’s (RBI) projection of 7.2%, it still fell short of last year’s 8.4% in the same quarter—further highlighting the gradual loss of economic momentum. This quarterly moderation was a key factor in dragging down the overall annual growth rate.
“The high-frequency data in the last few months continues to point towards a patchy recovery, with the sequential momentum suggesting moderation compared to the previous quarter,” stated Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank. She added, “We expect the benign inflation and soft growth to continue to provide the MPC room for incremental monetary easing, with 25bp cut in the upcoming June policy.”
For the full fiscal year, real GDP is estimated at ₹187.97 lakh crore, a 6.5 per cent increase from ₹176.51 lakh crore in FY24. Nominal GDP for FY25 is projected at ₹330.68 lakh crore, an increase of 9.8 per cent over the previous year. Real Gross Value Added (GVA) for FY25 stood at ₹171.87 lakh crore, showing a growth of 6.4 per cent, with nominal GVA estimated at ₹300.22 lakh crore. Bhardwaj noted that the GVA estimate at 6.8 per cent was “more tepid,” attributing the gap with GDP to high net indirect tax growth.
Despite the broader slowdown, certain sectors demonstrated resilience. Construction led the charge with a robust 9.4 per cent growth in FY25, accelerating to 10.8 per cent in Q4. Public administration, defence, and other services grew by 8.9 per cent for the year, while financial, real estate, and professional services expanded by 7.2 per cent. The primary sector, encompassing agriculture, livestock, fishing, and mining, saw an improvement, posting 4.4 per cent annual growth, up from 2.7 per cent in the previous year, and a strong 5.0 per cent in Q4.
On the expenditure front, Private Final Consumption Expenditure (PFCE), a key indicator of consumer demand, grew by 7.2 per cent in FY25, up from 5.6 per cent in the previous year, suggesting some strengthening in consumer demand. Gross Fixed Capital Formation (GFCF), a measure of investment, rose by 7.1 per cent annually and by 9.4 per cent in Q4, indicating continued capital spending and infrastructure activity.
However, concerns remain regarding the consistency of this recovery. Aditi Nayar, Chief Economist, Head – Research & Outreach, ICRA Limited, observed, “Private consumption growth eased, and likely remained uneven, while government final consumption expenditure contracted in Q4 FY2025, after a gap of two quarters.” She also pointed out that “discrepancies in H2 FY2025 are much larger than what was seen in H2 FY2024, and subsequent data revisions may entail a modification in growth of the expenditure side estimates.”
Looking ahead, Nayar cautioned, “While FY2026 has begun with heightened uncertainty around global trade policies, the outlook for domestic drivers of growth, including private consumption and Government investment, appears largely resilient… At present, ICRA forecasts GDP growth to dip slightly to 6.2% in FY2026 from 6.5% in FY2025.”
The latest GDP figures highlight a period of adjustment for the Indian economy, as it navigates global uncertainties and aims to regain its past growth momentum. The next set of quarterly GDP estimates, covering April–June 2025 (Q1 FY26), will be released on August 29, 2025, providing further insight into the economic trajectory.