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Despite slight downward revisions from Moody’s, United Nations and few other agencies, India is expected to remain one of the fastest growing economies in 2025, on resilient consumption, government spending, and structural reforms. CareEdge, meanwhile, pegged India’s real GDP growth for the fourth quarter of fiscal year 2025 at 6.8 per cent, which would bring the full-year FY25 GDP growth to 6.3 per cent, slightly revised downward from an earlier forecast of 6.4 per cent. The FY26 GDP growth, meanwhile, is projected at 6.2 per cent.
Going forward, per the report, factors such as recovering rural demand, a lower tax burden, policy rate cuts, falling inflation, and expectations of a good monsoon should support an improvement in economic activity. A sustained recovery in consumption will be critical to drive a meaningful uptick in corporate capex even as global uncertainties continue to pose a headwind.
CareEdge’s analysis, which utilizes a machine learning method based on its CareEdge Economic Meter (CEM)—an index tracking 40 high-frequency economic and policy indicators—suggested an uptick in economic activity in Q4FY25, with the CEM expanding by 3.0 per cent year-over-year, up from 2.6 per cent in Q3FY25. Provisional GDP data for the fourth quarter and FY25 are scheduled to be released on 30 May 2025.
How different sectors are powering India’s GDP
CareEdge details the performance across key sectors, highlighting areas showing improvement, mixed trends and deceleration. It maintained that the GDP growth in Q4 is likely to be supported by strong momentum in sectors such as agriculture, hotels & transport and construction. “Festivities during the ‘Maha Kumbh’ should support hospitality and transportation,” it added.
Areas showing Improvement
Agriculture sector: The agricultural activities, CareEdge said, have remained strong with rabi sowing of foodgrains surpassing last year’s level by 2 per cent. Domestic tractor sales have increased by 23.4 per cent YoY in Q4FY25, outperforming the 13.5 per cent YoY growth in Q3. Additionally, it added, fertilizer sales grew by 5.4 per cent in Jan-Feb 2025, higher than a growth of 0.4 per cent in Q3FY25.
Trade, Hotels and Transport: Per the data shared by CareEdge, domestic air passenger traffic went up by 12 per cent on-year in Q4FY25, higher than 11.4 per cent in Q3. Even as foreign tourist arrivals contracted by 1.3 per cent YoY in Q4FY25, it still was lower than a contraction of 3 per cent in Q3. Also, travel activities were up in Q4 on the back of Kumbh mela and major concerts. Furthermore, toll collections increased by 17.2 per cent in Q4, up from 12.7 per cent in Q3. E-way bill collections too rose 19.4 per cent YoY in Q4 FY25, higher than 16.9 per cent YoY in Q3.
Mining: As for mining, CareEdge said, IIP mining expanded by 2.1 per cent YoY in Q4FY25, higher than 1.8 per cent in Q3.
Areas showing Mixed Trends
Consumption demand: While the rural demand is expected to be supported by good agricultural output and falling inflation, urban demand still presents a mixed outlook. CareEdge maintained that gross domestic GST collections improved marginally to 9.7 per cent YoY in Q4FY25 from 9.5 per cent YoY in the previous quarter. Further evidence like growth in IIP consumer durables averaging 5.8 per cent during the quarter and IIP consumer non-durables contracting by 2.2 per cent in Q4, prove that consumption is dropping. Meanwhile, passenger vehicle sales in Q4FY25 too grew by 2.3 per cent which was lower than 4.5 per cent in Q3. Two-wheeler sales also slowed to 1.4 per cent on Q4 from 3 per cent YoY in the previous quarter.
Construction: Even as capital expenditure from the central government contracted by 4 per cent in Jan-Feb 2025, CareEdge said, spending increase towards the end of Q3FY25 is expected to support construction activity in Q4, given the typical lag in its impact. Further, finished steel consumption was up 11 per cent on-year in Q4, which was higher than 7.8 per cent in Q3. IIP infrastructure and construction goods also showed improvement in Q4. However, highway construction and bitumen consumption contracted by 8.4 per cent YoY and 3.8 per cent YoY respectively in Q4.
Manufacturing: Now for the manufacturing sector, IIP manufacturing growth moderated to 3.9 per cent YoY in Q4FY25, down from 4.5 per cent in Q3. Production of personal vehicles and cement improved in Q4 with a growth of 6.4 per cent YoY and 12.3 per cent YoY, respectively. However, front-loading of inventory accumulation by firms ahead of the reciprocal tariff supported certain sectors like electronics, CareEdge maintained.
Areas showing Deceleration
Government expenditure: What is pulling down the growth currently is the central revenue expenditure which contracted by 4.7 per cent in Jan-Feb 2025. Central capex also contracted by 4 per cent in the same period.
Financials and Real Estate: During the quarter in review, non-food credit growth slowed to 12.2 per cent YoY in Q4 from 12.3 per cent YoY in Q3 due to moderation in retail credit growth. Further, collection of life insurance first year premium contracted by 4.3 per cent YoY in Q4. Growth in stamp and registration revenue of major state governments contracted by 4 per cent YoY in Jan-Feb 2025.
External Trade: In terms of external trade, services export growth remained healthy but slowed to 14.1 per cent in Q4, lower than 17.9 per cent in Q3. Merchandise exports, meanwhile, contracted by 0.3 per cent YoY in Q4 against a growth of 4.4 per cent YoY growth in Q3. “Poor performance of goods export is largely due to contracting oil exports (-34 per cent YoY) and moderating non-oil exports (7.4 per cent YoY),” CareEdge said.
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