India’s GDP is projected to grow at 6.4% in the October-December quarter, driven by increased government spending despite uneven consumption trends. The economy had expanded by 6.7% in Q1 (April-June) but slowed to a seven-quarter low of 5.4% in Q2 (July-September) due to subdued government capital expenditure linked to general elections and weak consumer demand.
According to ICRA Chief Economist Aditi Nayar, the economy in Q3 FY2025 benefited from:
- A sharp rise in government spending (both capital and revenue expenditure)
- Robust growth in services exports
- A turnaround in merchandise exports
- Healthy output of major kharif crops, supporting rural sentiment
- Improvement in mining and electricity sectors, following weather-related disruptions in Q2
Some consumer-driven sectors saw a boost during the festive season, although urban consumer sentiment dipped slightly. GDP growth is expected to rise from 5.4% in Q2 to 6.4% in Q3, marking an improvement but still falling short of the NSO’s initial Q1 estimates. The National Statistical Office (NSO) will release the official Q3 GDP data on February 28, along with second advance estimates for the full fiscal year. In its January projections, the NSO estimated FY2025 GDP growth at 6.4%, a four-year low, while the RBI forecasted 6.6% growth.
India’s investment momentum improved in Q3, as indicated by growth in:
- Capital and infrastructure goods output
- Cement production
- Engineering goods exports
Government capital expenditure, which surged 47.7% YoY in Q3—a six-quarter high compared to 10.3% in Q2. While the economy is on a recovery path, sustained growth will depend on stable consumption trends and continued policy support.