An ET poll conducted earlier this month had pegged growth at a median 6.8% for the quarter and 6.3% for FY25.
Key risks to growth include tepid urban consumer demand, muted private investment demand and a volatile global environment. India has held its own in a “growth-scarce” post-Covid global environment amid rising uncertainties due to political conflicts and trade tensions, said chief economic advisor V Anantha Nageswaran.
To be sure, the full-year gross domestic product (GDP) growth of 6.5% marks a four-year low. India’s GDP had grown 9.2% in FY24. Despite the slowdown, India was the fastest-growing economy in the year and is on course to become the fourth largest later this year, overtaking Japan.
The nominal GDP growth rate was 9.8% in FY25 against a 12% rise in FY24, indicating a broadbased decline in inflation. The gross value added (GVA) grew 6.8% in the fourth quarter and 6.4% in FY25.
The economy had grown 6.4% in the December quarter and 8.4% in the year-earlier period. Gross fixed capital formation, an indicator of investment, rose 7.1% in FY25 and 9.4% in the March quarter. “Real GDP was expected to fare strongly, partly due to a boost from net indirect taxes,” said Radhika Rao, senior economist at DBS Bank.
Urban Demand an Issue
“A catch-up in government spending, accompanied by betterperforming construction output, has lifted the headline figure,” Rao said. Agriculture grew 5.4% in the fourth quarter, compared with 6.6% in Q3 and 0.9% a year ago. Manufacturing sector growth was 4.8% in the three months ended March, lower than 11.3% in Q4 of the previous year. Construction output surged 10.8% driven by high government capex. The 60 basis point gap between GDP and GVA in the fourth quarter was due to higher net indirect taxes, which rose 12.7%.
However, private consumption growth eased to a five-quarter low of 6% while government final consumption expenditure contracted 1.8% in the fourth quarter after a gap of two quarters. “The unevenness witnessed in the consumption recovery remains a critical monitorable going forward,” said Rajani Sinha, chief economist, CareEdge Ratings. “The softness in urban demand continues to be an area of concern.”
Economists said private sector participation in investment hanot yet taken off on a durable basis across sectors and, going ahead, India’s FY26 GDP growth is estimated at 6-6.6%.
US President’s Donald Trump tariff threats also loom large. “The reciprocal tariff is casting its shadow over global GDP and trade growth, which may force investors to postpone their investment decisions,” said Paras Jasrai, associate director, India Ratings and Research, adding that the investment outlook is still hazy.
Rao expects growth to stabilise around the 6.5% level at the start of FY26, supported by farm output, lower inflation and monetary easing, as well as continued public spending.
However, external uncertainties could have an impact through trade and investment channels. “We believe that the Indian economy is poised to remain the fastest-growing major economy in FY26 (GDP growth expected at 6.3-6.5%) by leveraging its sound macroeconomic fundamentals, robust financial sector and commitment towards sustainable growth,” said Soumya Kanti Ghosh, group chief economic adviser, State Bank of India
