India's GDP Growth Accelerates in Q4 FY25: What Are The Key Drivers?

India’s economy is showing its strength and resilience as it bounces back from previous challenges. In a clear sign of recovery, the country’s GDP surged by 7.4% in the fourth quarter (January–March) of the financial year 2024–25 (FY25), according to the latest provisional estimates released by the National Statistics Office (NSO). This impressive performance, released on Friday, highlights a remarkable economic rebound after a series of ups and downs earlier in the fiscal year.

As businesses and industries adapt to changing conditions, India’s economic growth trajectory continues to point upwards. After a more modest 6.2% growth in the third quarter, which was already an improvement from a seven-quarter low of 5.4% in Q2, the economy showed even greater promise. The growth in Q4 capped off a year where India's GDP growth stood at a healthy 6.5% for FY25, marking a significant improvement over the previous year.

This robust economic performance isn’t just a statistical success but also a reflection of India’s ongoing structural improvements, sectoral recoveries, and an increasingly confident consumer and investor sentiment.

India's GDP for FY25: A Year of Steady Growth

India's real GDP reached a total of ₹187.97 lakh crore (at constant 2011–12 prices) in FY25, a rise from ₹176.51 lakh crore in FY24. This translates to a year-on-year growth of 6.5%, confirming the country's ongoing economic recovery. When looking at the nominal GDP, the economy grew by 9.8% to ₹330.68 lakh crore, a positive sign that inflationary pressures were within manageable limits while growth remained strong.

For comparison, the Reserve Bank of India (RBI) had projected a 6.6% GDP growth for FY25, with a more optimistic forecast of 7.2% for the fourth quarter. This projection was almost spot on, indicating the accuracy of the RBI’s assessments and the economy’s ability to meet, and sometimes exceed, expectations.

Looking forward, the RBI has forecasted a slight moderation in growth for FY26, with a GDP growth rate expected to settle around 6.5%. While this indicates a slight dip, it still positions India as one of the most promising economies globally.

Sectoral Performance: Construction, Public Administration, and More

One of the standout features of India's economic growth in FY25 was the impressive performance across multiple sectors, particularly those crucial for infrastructure development, governance, and financial services.

In Q4 FY25, several key sectors posted strong growth rates:

• Construction: The sector grew at an impressive 10.8%, reflecting the continued demand for infrastructure development, housing, and urbanization efforts across the country.

• Public Administration, Defence & Other Services: This sector saw a growth rate of 8.7%, indicative of the government’s strong capital expenditure initiatives and the increasing role of public administration in driving the economy forward.

• Financial, Real Estate & Professional Services: This sector grew by 7.8%, underlining the continuing strength of India’s financial ecosystem, with an increasing contribution from the real estate and professional services sectors.

• Primary Sector (Agriculture, Livestock, Mining, etc.): The primary sector showed significant improvement, growing by 5.0% in Q4 FY25, compared to just 0.8% in Q4 FY24. This marks a strong recovery, particularly in agriculture, which is vital to the economy’s stability.

For the full fiscal year, the construction sector led the growth with a 9.4% rise, closely followed by public administration (8.9%) and financial services (7.2%). The primary sector also showed notable recovery, growing by 4.4%, a significant improvement from 2.7% in the previous year.

The Role of Consumer Demand and Investment

In addition to sectoral growth, India's private consumption and investment activity have been key drivers of the economy’s recovery.

• Private Final Consumption Expenditure (PFCE) rose by 7.2% in FY25, compared to 5.6% in FY24, signaling a strong recovery in consumer spending. This uptick in consumption reflects the improving confidence of Indian households, alongside government measures to support incomes and employment.

• Gross Fixed Capital Formation (GFCF), a critical indicator of investment activity, showed impressive growth. For FY25, GFCF grew by 7.1%, while Q4 alone saw a sharper increase of 9.4%. This sharp rise in investment suggests that businesses are becoming more confident in the economic recovery and are preparing for future growth.

The Bigger Picture: Expenditure, GVA, and Projections for FY26

Real Gross Value Added (GVA), which provides a more accurate reflection of the country’s economic health, grew by 6.4% for FY25, reaching ₹171.87 lakh crore. Nominal GVA rose by 9.5% to ₹300.22 lakh crore. In Q4 alone, real GVA grew by 6.8%, while nominal GVA climbed by 9.6%, reinforcing the overall strength of the economy.

The estimates, compiled using data from a wide range of sources—including industrial production, crop estimates, financial results of listed companies, port traffic, vehicle sales, and tax collections—paint a detailed and comprehensive picture of India's economic landscape.

Methodology and Future Revisions

As with all economic projections, the NSO cautioned that these provisional estimates might be revised as more complete data becomes available. However, based on the available information, these figures highlight a continued momentum in India’s economic recovery and growth.

The next set of quarterly GDP estimates, for Q1 FY26 (April–June 2025), will be released on August 29, 2025. These updates will further shed light on the economy’s performance and provide a clearer picture of how India is navigating the post-pandemic world.

Key Takeaways: India's Economic Resilience

• Q4 FY25 GDP Growth: 7.4%

• Annual GDP Growth for FY25 (Real): 6.5%

• Nominal GDP Growth: 9.8%

• Strong Sectoral Drivers: Construction, Public Administration, Financial Services

• Private Consumption and Investment Surge

• RBI’s FY26 GDP Growth Forecast: 6.5%

India's economy continues to show remarkable resilience, bolstered by strong government capital expenditure, robust sectoral performance, and increasing private consumption. With these key drivers in place, the country is set on a steady path toward sustained medium-term growth, and the outlook for FY26 remains cautiously optimistic.

As India steps into a new fiscal year, the focus will be on maintaining this growth momentum, addressing challenges, and capitalizing on the opportunities that lie ahead. With a solid foundation in place, India is poised to continue its rise as one of the world’s most promising economies, and it is evident that the Indian startup ecosystem will play a crucial role in this growth story.