India’s FY25 GDP Growth Slows to 6.5%, Lowest in Four Years Despite Strong Q4 Performance

India’s economy grew at 6.5% in the financial year 2024–25 (FY25), marking its slowest pace of expansion in four years, according to data released by the National Statistics Office (NSO) on Friday. While the figure reflects a moderation in the post-pandemic growth momentum, the March quarter (Q4) offered a brighter note with real GDP rising by 7.4%, the highest quarterly growth for the year.

The slowdown comes after India saw a rapid economic rebound during the pandemic recovery years. In comparison to FY24, when the economy expanded more strongly, the FY25 figure suggests cooling in economic activity. The government’s official statement pegged real GDP growth at 6.5% and nominal GDP growth at 9.8%, slightly below the earlier projection of 9.9%.

Despite the overall deceleration, India retains its status as one of the fastest-growing major economies. The International Monetary Fund (IMF) projects that India could surpass Japan in terms of economic size by the end of the year, with its GDP expected to reach $4.18 trillion.

Q4’s robust performance was largely driven by agriculture, construction, and private consumption. Agriculture, which had seen modest growth of 2.7% in FY24, grew by 4.6% in FY25. The sector’s performance in Q4 was particularly strong, expanding by 5.4% compared to just 0.9% a year earlier.

The construction industry also continued to post solid gains, registering a 9.4% year-on-year growth, marginally lower than the previous year’s 10.4%. However, Q4 growth in the sector accelerated to 10.8%, up from 8.7% in the same quarter last year.

Private consumption, a key driver of the economy, rose by 7.2% year-on-year, up from 5.6% in FY24. This increase was supported by stronger rural demand, easing food inflation, and higher festive season spending.

Manufacturing, however, remained a weak spot. The sector grew by only 4.5% in FY25, a sharp decline from 12.3% in the previous year. Growth in Q4 stood at 4.8%, down significantly from 11.3% during the same quarter last year.

Commenting on the data, Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, said, “The Q4 FY25 GDP numbers are marginally higher than our expectations but broadly in line with government estimates. The GVA estimate remains tepid at 6.8%.”

She added that high-frequency indicators signal a patchy recovery. “We expect the combination of soft growth and benign inflation to allow for a 25 basis point policy rate cut in the upcoming June meeting of the Monetary Policy Committee.”

IT.