India Q3 GDP data on Friday: Urban demand to govt capex—here are five key indicators to watch

India Q3 GDP data tomorrow: The Indian economy likely moderated to 6.2-6.3 per cent in the October-December quarter of the current fiscal (Q3FY25), driven by an uptick in buoyant rural consumption and agriculture output and an upturn in the Centre’s capex and industrial activity. Weak urban consumption, along with moderation in real estate activity, will likely drag economic growth.

According to credit rating agency ICRA, India’s Q3 GDP growth is pegged at 6.4 per cent in the December quarter, driven by enhanced government spending amid uneven consumption. Economists noted that consumer-focused sectors witnessed a pick-up in demand during the year-end festive season. Urban demand dipped slightly, and other sectors, such as mining and electricity, improved after weather-related challenges in the previous quarter.

Also Read: India Q3 GDP View | India’s economic growth pegged at 6.3% in December quarter of FY25 on govt spending: ICRA

According to the median estimate of 23 economists in a Mint poll, India's economic growth likely rose to 6.3 per cent in the December quarter. Despite the rise, growth will be more than two percentage points lower than the rise seen in the same quarter a year ago. Gross domestic product (GDP) data for the third quarter of FY25 is scheduled to be released on Friday, February 28, 2025.

India Q3 GDP: Here are five indicators to watch

1.Urban, rural consumption

Rural demand has outperformed urban for the fourth consecutive quarter, tracked by fast-moving consumer goods (FMCG) rural sales (volume), which increased by nine per cent year-on-year (YoY) in Q3 compared to five per cent YoY for the urban markets. Rural consumption has improved with a good monsoon when food prices have remained elevated, thus benefiting farmers.

According to an ICICI Bank research report, India's urban consumption has been subdued because of moderating wage growth (8.1 per cent in the third quarter compared to 9.6 per cent in the second quarter) and credit growth at 11 per cent year-on-year (YoY) in Q3 compared to 13 per cent YoY in Q2.

Also Read: India’s CAD to widen to 1.3% of GDP in FY26 on export headwinds from Trump’s trade policies: Crisil
 

2.Industrial Activity

In Q3, production improved, as evident in the rebound of the index of industrial production (IIP) at four per cent YoY (2.7 per cent YoY in Q2). Within the industry, manufacturing activity grew by 4.3 per cent YoY, led by an uptick in capital goods, infrastructure, construction goods and metals output. Mining inched up by 1.8 per cent YoY in Q3 after it had recorded an eight-quarter low in Q2. 

Experts say that given rising temperatures, electricity demand should increase in the coming months. Construction activity is expected to be buoyant but not grow at the same pace seen in the last few years since the central government's capex spending is increasing slower than we have seen post-pandemic.

Also Read: India Q3 GDP View | Indian economy likely grew by 6.2-6.3% in December quarter of FY25 on capex, demand revival: SBI
 

3.Services Sector

The services sector continues to perform well in H1FY25, growing by 7.1 per cent YoY from 8.4 per cent YoY in the same period last year. According to ICICI Bank, the sector's performance is also reflected in high-frequency indicators such as services PMI, which averaged 58.7 in Q3 as against 59.6 in Q2.

Corporate performance for 975 services companies showed revenue growth continued to be relatively better placed, led by telecom and real estate. A one-time price increase largely drove the sharp increase in telecom sector revenue.

4.Corporate Earnings

The Q3 results season for FY25 delivered mixed results, with the Nifty 50 index reporting a modest five per cent YoY net profit growth, in line with Dalal Street expectations. This marks the third consecutive quarter of single-digit net profit growth since the COVID-19 pandemic. While large-caps met expectations, mid-caps outperformed, and small-caps reported significant misses. 

The October- December quarter corporate earnings scorecard was modest, again driven by BFSI, with positive contributions from technology, telecom, healthcare, capital goods, and real estate. The healthcare sector recorded a 25 per cent YoY earnings growth, exceeding analysts' estimates of 19 per cent.

5.Government Capex

After a slow start to capital expenditures by the government during H1FY25 (-15 per cent YoY), government capex picked up by 48 per cent YoY in Q3. Even in Q4, capex spending on infrastructure is expected to increase to meet the budgetary target of ₹10.2 trillion, which translates into a 21.2 per cent increase. At the same time, capital goods output improved in Q3 to 7.3 per cent YoY from 4.9 per cent YoY in Q2, although capital goods imports decelerated in Q3.

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