Photo Credit: SME Futures
In a strong finish to the financial year, India’s GDP grew by 7% in the fourth quarter of FY25, beating earlier forecasts and hinting at signs of economic momentum. However, the full-year GDP growth for FY25 settled at 6.3%, slightly lower than FY24’s 7.1%, reflecting a year of balancing highs and lows in a complex global environment.
Q4 FY25 GDP Growth: What Powered the Surge?
The 7% growth in Q4 wasn’t a fluke. It was fuelled by a double-engine push from:
- Higher government capital expenditure
- A rebound in rural demand
- Steady growth in services exports
- And improving agricultural output thanks to favourable monsoons
This marks a pickup from Q3 FY25, which posted a 6.2% growth, and it sends a positive signal just before general elections and the announcement of a new Union Budget.
Annual GDP Growth at 6.3%: Still Among Fastest Globally
While a full-year GDP growth of 6.3% sounds modest compared to last year’s 7.1%, India still retains its status as one of the world’s fastest-growing major economies in 2025. The global backdrop — with ongoing geopolitical tensions, fluctuating oil prices, and weak manufacturing trends — made it a tough year for most nations.
India’s Gross Value Added (GVA) for Q4 stood at 6.4%, reflecting real economic activity. Strong tax collections gave a slight boost to the final GDP figures.
Sector-Wise Breakdown
- Agriculture: Recovery mode, thanks to better rainfall and higher Rabi crop yields.
- Industry: Moderate growth amid weak global demand.
- Services: Continued to shine, especially IT, finance, and tourism.
What Lies Ahead: GDP Forecast for FY26
The Reserve Bank of India (RBI) and several economists forecast that India’s GDP could grow between 6.3% and 6.8% in FY26. Factors working in India’s favour include:
- Continued public capex focus
- Strong financial sector performance
- Inflation under control (mostly!)
- And a stable rupee
But beware, there are challenges too:
- Global uncertainty and sluggish Western economies
- Supply chain risks
- Oil price volatility
- And the ever-present threat of El Niño affecting agriculture
What Experts Are Saying
“India’s Q4 growth is a pleasant surprise. The bounce in rural demand shows that the consumption story may be getting back on track,” said a senior economist at a Mumbai-based think tank.
“We’re seeing green shoots across sectors, but sustaining this growth will need a fine balance between fiscal prudence and targeted stimulus,” added another.
Final Word
The Indian economy might have taken a breather from the 7%+ sprint of FY24, but the 7% growth in Q4 FY25 shows there’s still plenty of fuel left in the tank. With key reforms on the horizon and a government that’s shown willingness to invest in infrastructure and digital transformation, FY26 might just be the comeback year everyone’s waiting for.
