The National Statistical Organization (NSO) has released a host of GDP data. While market participants were focused on the statistical body’s GDP growth estimate for Q3 FY25, the GDP growth data for FY23 and FY25 stole the limelight.

• The FY23 GDP growth number is now frozen after multiple rounds of estimation. The final figure was reported at 7.2%, up 60 bps vs. the first revised estimate.
• FY24 GDP growth as per the first revised estimate was reported at 9.2%, up 100 bps vs. the second advance estimate.
• As per the second advance estimate of FY25 GDP, growth now stands revised up marginally by 10 bps to 6.5%.

There are two key takeaways from the revisions to the annual GDP data. First, the economic growth over FY23 and FY24 has turned out to be much stronger than estimated earlier. Second, the deceleration in economic growth in FY25 (notwithstanding the minor upward revision) now looks sharper in comparison.

Moving on to the high-frequency quarterly data, Q3 FY25 GDP growth has been estimated at 6.2% YoY (close to the market consensus expectation of 6.3%), higher than 5.6% in Q2 FY25 (revised up from 5.4% reported earlier).

Key internal highlights of Q3 FY25 GDP data

• The main source of support came from exports that clocked a 7-quarter high annualized growth of 10.4% vs. 2.5% in Q2 FY25. This was on the back of (i) a turnaround in merchandise exports to expansion territory in Q3 vis-à-vis a contraction in Q2 and (ii) acceleration in services exports growth to a 7-quarter high of 17.5% YoY in Q3 FY25. 
• Government consumption expenditure also posted a strong performance, with a 5-quarter high annualized growth of 8.3% in Q3. The pick-up appears to have been supported by both central and state governments.
• Last, but not the least, growth in private consumption expenditure recovered to 6.9% YoY in Q3 from 5.9% in Q2 FY25. Signals from proxy indicators suggest that the recovery is likely to have been driven by rural consumption.
• Investment growth remained subpar at 5.7% YoY in Q3 FY25, the lowest in 7-quarters. Although capex disbursal by central and state governments picked up handsomely from ~5% YoY in Q2 to ~28% in Q3, the same is likely to have been offset by lack of private participation.
• On the supply side, GVA (Gross Value Added) growth printed at 6.2% YoY, up from 5.8% in Q2 FY25.
  1. Agri and allied sector GVA accelerated to a 6-quarter high of 5.6% YoY in Q3 FY25 owing to a healthy kharif outturn.
  2. Industry GVA improved a tad to 4.5% YoY in Q3 FY25 from 3.8% in Q2. Barring construction, all other sub-sectors recorded an improvement in the pace of growth vis-à-vis Q2.
  3. Services GVA also showed a minor improvement to 7.4% YoY from 7.2% in Q2 FY25, led by the sectors of trade, hospitality, transport, and communication.

Inference and outlook

Basis NSO’s full-year estimate, the implied annualized growth for GDP and GVA for Q4 FY25 comes to around 7.6% and 6.8%, respectively. The difference between the implied GDP and GVA growth for Q4 FY25 stands at +72 bps, significantly higher than the average difference of -11 bps seen in Q1-Q3 FY25 data. This could be on account of changes in the revised estimates in the FY25 Union Budget for indirect taxes and subsidies.

We continue to believe that GVA is a relatively better proxy for assessing underlying economic activity. The implied improvement in the GVA run rate from 6.2% YoY in Q3 to 6.8% in Q4 FY25 appears plausible (in contrast, the stark improvement in the implied GDP growth in Q4 FY25 could be somewhat difficult to rationalize or attribute a priori).

Basis NSO’s full-year estimate of 6.5% GDP growth, the implied annualized growth for GDP and GVA for Q4 FY25 comes to around 7.6% and 6.8%, respectively. These figures appear aggressive and can translate into reality if there is a large one-time boost from the Kumbh mela event.

Beyond the statistical implications, there are three key underlying themes to consider for Q4 FY25 and more so in FY26.

• Heightened geopolitical and geoeconomic uncertainty has completely clouded the outlook on global trade. With India potentially under US scrutiny for imposition of reciprocal tariffs, the overall impact on India’s GDP would depend upon how policymakers navigate through this imbroglio. A combination of reduction in customs duties, increasing imports from the US, establishing a bilateral trade deal, and some adjustment in the exchange rate would all contribute towards India’s policy response. 
• Global uncertainty could have a rub-off effect on the private sector’s investment appetite. This could be somewhat offset by the domestic policy focus on supporting private consumption via the easing of interest rates by the RBI and income tax relief provided in the FY26 Union Budget.
• On the weather front, La Niña conditions are expected to persist in the near term, with a transition to ENSO neutral conditions during March-May 2025 with 66% probability. This should be supportive of India’s southwest monsoon in 2025, thereby buoying agriculture output as well as rural demand. Having said that, one needs to keep an eye on rising mercury levels – after recording above-normal temperatures during Jan-Feb 2025; the IMD expects above-normal temperatures to persist during Mar-May 2025, with large parts of the country likely to experience intense heat conditions.

Going forward, geopolitical and geoeconomic uncertainty, India’s policy response on emerging trade issues and weather conditions will determine the growth trajectory. For FY26, we have kept our GDP growth forecast at 6.6% as of now. The estimate could get fine-tuned with better clarity on global trade and weather prospects in the next 2-3 months.

Says Suman Chowdhury, Chief Economist and Executive Director, Acuité Ratings & Research “The recovery in GDP growth in Q3FY25 to 6.2% has been largely in line with market expectations and not surprisingly, driven by stronger rural demand, an uptick on the export front and a pickup in government expenditure. However, the recovery remains uneven across sectors, with urban demand still showing signs of weakness despite the festive and wedding season boost. Rural demand helped offset some of the softness in urban consumption, supported by a strong kharif harvest and robust rabi acreage as reflected in the healthy growth of 6.9% YoY in private consumption. Agriculture GVA posted an optimistic 5.6% growth, in line with expectations. Services GVA continues to remain resilient at 7.4%. However, private investment remains muted, constrained by high borrowing costs and global uncertainty.

Importantly, the revision in the full year estimate to 6.5% by NSO imply that GDP growth has to rev up massively to 7.6% in Q4FY25. While a significant bump up in the GDP and private consumption is expected in the current quarter due to the one-time boost of the “Kumbh Mela”, NSO’s estimates appear to be optimistic and prone to downside risks. We maintain our growth forecast at 6.4% for FY25.  

Looking ahead, India’s growth trajectory will hinge on a broader revival in private investment, stable exports, and a stronger urban demand recovery. The fiscal measures on tax cuts for the middle class and RBI’s steps on an easier monetary policy through a 25bps rate cut along with improved liquidity, will be clearly supportive of the growth momentum. On the other hand, global headwinds are mounting, adding uncertainty to the outlook. Currently, we peg GDP growth for FY26 at 6.6%."

Table 1: India’s GVA and GDP: Sectoral break-up : Annual

Table 2: India’s GVA: Sectoral break-up of annualized growth: Quarterly 

Chart 1: As per NSO’s projections, GDP could see faster acceleration in Q4 FY25 compared to GVA