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India’s fourth-quarter GDP numbers are out, and they’ve taken many by surprise. While the full-year growth rate has cooled, Q4 growth at 7.4 per cent is a shot in the arm for investors tracking India’s macro pulse.
Let’s unpack the numbers, what’s driving them, and what it means for long-term investors betting on India.
What’s happening?
India’s GDP for Q4 FY25 (January-March) grew by 7.4 per cent, exceeding analyst expectations. Sectors like construction, agriculture and services led the charge.
On the flip side, full-year FY25 GDP growth came in at 6.5 per cent – the lowest in four years – owing to sluggish private investment and a high base effect from FY24.
Yet, despite the deceleration, India remains the fastest-growing major economy in the world.
Key reasons behind the spike
- Construction boom: The construction sector grew by a robust 10.8 per cent in Q4, supported by infrastructure spending and real estate activity.
- Services bounce back: Public administration, defence and other services contributed strongly to the quarter’s output.
- Agriculture rebound: Agricultural growth jumped to 5.4 per cent in Q4, up from just 0.9 per cent in the same period last year.
- Consumption uptick: Private consumption picked up pace, with final consumption expenditure rising 7.2 per cent for the year.
The bigger picture
India’s nominal GDP is now estimated at $4.19 trillion, overtaking Japan to become the world’s fourth-largest economy. The country is expected to become the third-largest economy by 2027, overtaking Germany.
And the RBI may add fuel to the fire as analysts expect a 25-basis-point rate cut in the June 6 meeting, and another in August. A softer interest rate environment could boost both consumption and capex.
Implications for investors
India’s growth trajectory may have slowed in FY25, but its economic engine remains powerful.
If you’re betting on India’s growth story, the Q4 GDP number is encouraging. The underlying strength in domestic consumption and the construction sector shows that the economy has legs. But don’t ignore the warning signs – weak private capex means India still relies heavily on government spending and household consumption.
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Disclaimer: This story was created with the assistance of artificial intelligence and is intended for informational purposes only. Please take it with a pinch of salt and do your own research or consult a financial advisor before making investment decisions.
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