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

India Q3 GDP Growth: Domestic rating agency ICRA projected India's gross domestic product (GDP) to grow 6.4 per cent in the December quarter of FY25, driven by enhanced government spending amid uneven consumption.

The Indian economy grew at 6.7 per cent in the April-June period. However, it slowed to a seven-quarter low of 5.4 per cent in the September quarter, dragged by sluggish government capital expenditure due to the 2024 general elections and weak consumption demand. High inflation during monsoons also hit the purchasing power of the middle-class sector in urban areas.

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India Q3 GDP Growth Estimates

ICRA Chief Economist Aditi Nayar said India's economic performance in Q3 FY2025 benefitted from a sharp ramp-up in aggregate government spending (Centre and state) on capital and revenue expenditure, high growth in services exports, a turnaround in merchandise exports, the healthy output of major Kharif crops etc., which would have buffered rural sentiment.

Economists noted that some consumer-focussed sectors witnessed a pick-up in demand during the festive season, even as urban consumer sentiment dipped slightly, and other sectors, such as mining and electricity, saw an improvement after weather-related challenges in the previous quarter.

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"Overall, while we expect the pace of GDP and the GVA expansion to rise in Q3 FY2025 relative to the seven-quarter low prints for the previous quarter, marking an upturn, the performance may remain inferior to the National Statistical Office (NSO)'s initial estimates for Q1 FY2025," said Nayar.

The NSO will release the October- December growth estimates on February 28. It will also release the second advance estimate of GDP for FY25. In the first advance estimates NSO projected GDP growth at a four-year low pace of 6.4 per cent in the current fiscal. The RBI expects India's GDP growth to be 6.6 per cent in FY25.

ICRA has projected the economy to grow at 6.4 per cent in Q3 from 5.4 per cent in Q2, benefitting from enhanced government spending amid uneven consumption. India's investment activity improved in Q3, as reflected in the uptick in the YoY growth in several investment-related indicators vis-a-vis Q2.

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This includes capital and infrastructure goods output, cement production, engineering goods exports, and capital spending of the Centre and state governments. The YoY expansion in the government's capex surged to a six-quarter high of 47.7 per cent in Q3 from 10.3 per cent in the previous quarter.
 

India Q2 GDP growth

Two consecutive quarters of disappointing economic growth have left economists hoping for a rebound in the second half of FY25. India's GDP growth of 5.4 per cent in the September quarter was the slowest in nearly two years, and lower than economists’ estimates. A Mint poll of 25 economists had predicted 6.5 per cent growth for Q2. Despite the sluggish quarters, India still remains one of the world’s fastest-growing major economies.