The Indian economy expanded by 6.2 per cent during the October-December quarter (Q3) of Fiscal Year 2024-25, propelled by rural consumption following a favourable monsoon and an uptick in government spending, data released by Statistics Ministry on Friday revealed. This is higher than the revised 5.6 per cent growth achieved during the July-September quarter.
Chief Economic Advisor V Anantha Nageswaran said that the ‘Mahakumbh’ is expected to further drive consumption during the current quarter (January-March or Q4), which will help achieve 6.5 per cent growth for the whole fiscal year. “(It is) hard to put a number to it,k but Kumbh mela will offer a significant boost to consumption expenditure in the March quarter,” Nageswaran said.
The Finance Ministry has revised the growth number for Fiscal Years 2022-23, 2023-24 and 2024-25, besides the first (April-June) and second quarters (July-September) of the current fiscal year. Of all these, data related to FY24 is particularly significant. “As per the first revised estimates, Real GDP has grown by 9.2 per cent in FY24, marking the highest growth in the past 12 years except for the financial year 2021-22 (the post-Covid year),” the Ministry said in a statement. Earlier, the figure was 8.2 per cent.
During Q3 of the current fiscal, Gross Value Added (GVA) grew 6.2 per cent compared to the revised 5.8 per cent expansion in the previous quarter. For the full year, the government now pegs GDP growth at 6.5 per cent, marginally higher than its initial estimate of 6.4 per cent but below the revised growth rate of FY24. To meet the growth estimate of 6.5 per cent for the full financial year, India needs to grow at 7.6 per cent in the January-March period.
Asserting that this implied rate is possible, Nageswaran said that tax cuts announced in the Union Budget 2025 will play a crucial role in enhancing India’s medium-term economic prospects. Downplaying the concerns on account of Trump’s tariff tension, he said, “It would be premature to speculate on India’s stance regarding reciprocal tariffs at this stage. Also, it is not enough to just focus on reciprocal tariff headlines; softer crude oil prices can offset potential impact of reciprocal tariffs.”
Commenting on the latest numbers, DK Srivastava, Chief Policy Advisor at EY India, said that the upward revisions in nominal GDP growth imply a lowering of tax buoyancy and the tax-GDP ratios. Higher levels of nominal GDP may also imply a lowering of fiscal deficit and debt relative to GDP as compared to the budget estimates. This may provide some fiscal space for uplifting government demand, both consumption and investment, which is needed to combat the current growth slowdown.
“We estimate that an additional GoI capital expenditure of close to ₹33,000 crore can be undertaken while maintaining a fiscal deficit of 4.4 per cent of GDP in 2025-26 assuming that the 10.1 per cent nominal GDP growth is applied to a higher 2024-25 nominal GDP magnitude as per the SAE,” he said.
