Indian Economy Grows 6.2% in Q3 FY2024-25, Recovery Remains Uneven

New Delhi, February 28: India’s gross domestic product (GDP) expanded by 6.2% in the October-December 2024 quarter, rebounding from the previous quarter’s seven-quarter low of 5.6%, according to data released by the Ministry of Statistics on Friday. However, the growth was lower than the 9.5% recorded in Q3 FY2023-24 and below the Reserve Bank of India’s (RBI) projection of 6.8%.

For the full fiscal year 2024-25, GDP growth is now projected at 6.5%, slightly higher than the initial estimate of 6.4% but significantly lower than the 9.2% expansion in FY2023-24. Despite the moderation, India is set to retain its position as the fastest-growing major economy.

Key Drivers of Growth​

The Q3 GDP recovery was primarily fueled by government spending, which supported the construction sector and drove overall demand. Additionally, strong rural consumption and robust service exports contributed to the rebound. However, urban demand remained sluggish, despite support from the festive and wedding seasons.

Private consumption, a crucial component of economic growth, grew 6.9% year-on-year, aided by a strong kharif harvest and robust rabi acreage.

Sectoral Performance​

The manufacturing sector saw a sharp slowdown, with output growth declining to 3.5% in Q3 FY2024-25, compared to 14% a year earlier. Similarly, mining and quarrying growth slipped to 1.4% from 4.7%.

The construction sector also witnessed a slowdown, expanding 7% compared to 10% in Q3 last year. However, the agriculture sector reported a notable growth of 5.6%, significantly higher than 1.5% in the year-ago period.

The services sector, a key contributor to India’s GDP, showed mixed trends:

• Trade, hotels, transport, and communication grew 6.7% (down from 8%).
• Financial, real estate, and professional services expanded 7.2%, slightly lower than 8.4% in Q3 FY2023-24.
• Public administration, defence, and other services recorded 8.8% growth, marginally up from 8.4%.

Economic Outlook and Challenges​

Chief Economic Adviser V Anantha Nageswaran stated that India’s growth momentum is expected to continue, with government and private spending along with exports driving Q4 expansion.

However, economists warn of challenges, including:

• Global uncertainties, particularly merchandise export slowdowns and fluctuating commodity prices, which could impact corporate margins.
• Weak urban demand, which remains a concern despite seasonal boosts.
• Slower private investment recovery, crucial for sustained growth.

Aditi Nayar of ICRA pointed out that while Q1 GDP growth was revised down to 6.5%, the Q2 estimate was revised upward to 5.6%. The Q4 GDP is implicitly projected at 7.6%, though experts caution that this may be optimistic given external risks.

Infrastructure and Fiscal Deficit Updates​

The eight core infrastructure industries grew 4.6% in January 2025, up from 4.2% a year ago, though slightly lower than 4.8% in December 2024.

Meanwhile, the Centre’s fiscal deficit reached 74.5% of its annual target by January 2025, with an actual deficit of ₹11.69 lakh crore for April-January FY2024-25.

GDP Estimates and Growth Projections​

The National Statistical Office (NSO) revised FY2023-24 GDP growth upward to 9.2% from the earlier estimate of 8.2%. The revised real GDP estimate for FY2024-25 now stands at ₹187.95 lakh crore, reflecting a 6.5% expansion, down from 9.2% last year.

In nominal terms, GDP for FY2024-25 is projected at ₹331.03 lakh crore, marking a 9.9% increase over the previous year’s ₹301.23 lakh crore.

Conclusion​

India’s economic recovery is gaining traction, but sectoral disparities and external headwinds remain a challenge. While strong rural demand and government spending are key drivers, weak urban consumption and global uncertainties could temper growth in the coming quarters. The next few months will be crucial in determining whether private investment picks up to support long-term economic momentum.