India’s GDP growth rebounded to 6.2% YoY in Q3FY25 from 5.6% YoY in the previous quarter. The second advance estimates revised FY25 GDP growth upward to 6.5% YoY from the earlier estimate of 6.4% YoY.

The agricultural sector reported a strong growth of 5.6% YoY, driven by a healthy Kharif harvest. The manufacturing sector growth recovered to 3.5% YoY from 2.1% in the previous quarter, driven by improved operating profit growth of listed manufacturers and an uptick in IIP manufacturing growth. Services sector growth remained resilient as weaker construction activity was offset by an improvement in ‘Trade, Hotels, Transport and Communication’.

Private consumption growth picked up to 6.9% YoY in Q3FY25 from 5.9% in the previous quarter, driven by strong rural demand, while urban consumption remained subdued. Government consumption recovered to 8.3% YoY from 3.8% in Q2 on account of recovery in spending in the December quarter. Fixed investment growth remained flat at 5.7% YoY in Q3. Exports reported a robust growth of 10.4% YoY in Q3 in real terms.

Real GDP growth is projected to slow to 6.5% YoY in FY25 from 9.2% YoY in FY24. Nominal GDP growth is expected to decline to 9.9% YoY in FY25 from 12% YoY in FY24, as weaker real GDP growth outweighs the impact of a higher GDP deflator (inflation). On the production side, the manufacturing sector sees the largest decline in its contribution to GDP growth in FY25, while on the expenditure side, fixed investment experiences the sharpest drop in contribution. Based on FY25 advance estimates, imputed GVA and GDP growth for Q4 stand at 6.8% YoY and 7.6% YoY, respectively.

We expect FY26 GDP growth to be around 6.5–6.7% YoY. Declining inflation, interest rate cuts, regulatory easing, and income tax reductions are fostering a favourable environment for economic recovery.

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