Fri Feb 28 18:40:00 UTC 2025: ## India’s GDP Growth Accelerates in Q3, but Challenges Remain for FY25 Target

**NEW DELHI** – India’s real Gross Domestic Product (GDP) growth picked up pace in the October-December 2024 quarter (Q3 of FY25), reaching 6.2 percent compared to 5.6 percent in the previous quarter, according to the National Statistics Office (NSO). This acceleration is attributed to rising consumption demand. However, achieving the projected 6.5 percent growth for the full fiscal year (FY25) will require a robust 7.6 percent growth in the final quarter (Q4).

While the NSO revised FY24 GDP growth upwards to 9.2 percent (from 8.2 percent), the highest in 12 years excluding 2021-22, concerns remain about sustained growth. The upward revision in FY24 and FY23 GDP figures to 9.2% and 7.6% respectively, also suggests previous underestimation of post-COVID recovery.

The Q3 growth was driven by a strong performance in agriculture (six-quarter high) and private final consumption expenditure (PFCE), which grew by an estimated 7.6 percent. However, manufacturing sector growth remained subdued at 3.5 percent, while Gross Fixed Capital Formation (GFCF), an indicator of investment demand, slowed to a seven-quarter low of 5.7 percent in Q3.

Chief Economic Adviser V Anantha Nageswaran expressed optimism about achieving the Q4 target, citing strong export performance, continued government capital expenditure (despite initial delays), and substantial spending related to the Mahakumbh religious gathering. However, economists caution that private sector capital expenditure is lagging, with the investment-to-GDP ratio hitting a three-year low. Concerns persist about the manufacturing sector’s underperformance and potential urban consumption weakness.

The government’s final consumption expenditure (GFCE) showed improvement in Q3, reaching 8.3 percent, but overall, investment remains muted. While the central government’s capital expenditure grew by 5 percent year-on-year, economists at IDFC FIRST Bank highlight the need for private sector investment to pick up. They point to the subdued investment demand as a potential indicator of further weakness in private corporate capex and household investment in real estate.

Achieving the projected FY25 growth target presents challenges, particularly considering renewed geopolitical risks and the need for stronger private sector investment. However, moderating inflation is expected to boost real wages and consumption demand.

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