New Delhi: The Indian economy likely gained momentum in the fourth quarter of FY25, driven by strong agricultural output that lifted rural demand, according to an ET poll of economists. The survey pegged growth in FY25 at a median of 6.3%, lower than the government’s 6.5% estimate in February and the 6.6% projection of the Reserve Bank of India (RBI).
For the March quarter, the median forecast of 10 economists estimated gross domestic product (GDP) growth at 6.8% from the year earlier, with their numbers ranging from 6.2% to 7%. In the preceding December 2024 quarter, GDP growth was 6.2%. The median estimate for the January-March period is less than the RBI’s forecast of 7.2%.
Inventory stocking ahead of the threatened US tariffs also provided some push. The US has suspended the imposition of tariffs for 90 days to July. To be sure, the two countries are also negotiating a bilateral trade agreement, which could be unveiled in July.
Not a full-blown recovery
“Economic activity in the fourth quarter is expected to remain resilient, supported by strategic frontloading of inventories by firms ahead of reciprocal tariff implementations and increased economic activity during the Maha Kumbh celebrations,” said Rajani Sinha, chief economist at CareEdge Ratings.
The Maha Kumbh took place in Prayagraj from January 13 to February 26.
“Catch-up in government spending, consumption pick-up on easing inflation, stronger farm output and positive lead indicators on rural demand are expected to help growth trends,” said Radhika Rao, senior economist at DBS Bank.
Lower inflation is seen bolstering real growth.
“The deflator will be a little more supportive as both wholesale and retail inflation eased, which will give little boost to real growth,” said Gaura Sengupta, chief economist at IDFC First Bank.
On average, wholesale and retail inflation was at 2.3% and 3.7%, respectively, in the fourth quarter. That’s down from 2.5% and 5.6% in the third quarter.
The National Statistical Office (NSO) will release the official GDP figures for Q4 and provisional estimates for FY25 on May 30.
Some high-frequency indicators suggest the recovery is still not full-blown — capital expenditure is lagging behind, urban demand is tepid, and corporate earnings are muted. “While we expect an improvement from 3Q to 4QFY25, asharper rebound is restrained by a weak credit growth impulse, and tight financial conditions in that quarter,” said Rao.
US tariff risks
The US has said it will impose 26% duty on Indian goods. While this has been paused for 90 days until July 9, the baseline tariff of 10% remains in place.
While rural demand is showing signs of recovery, urban consumption lags behind.
“Slowdown in real urban wage growth and reduction in savings buffer had an impact on urban consumption,” said Sengupta.
For the March quarter, the median forecast of 10 economists estimated gross domestic product (GDP) growth at 6.8% from the year earlier, with their numbers ranging from 6.2% to 7%. In the preceding December 2024 quarter, GDP growth was 6.2%. The median estimate for the January-March period is less than the RBI’s forecast of 7.2%.
Inventory stocking ahead of the threatened US tariffs also provided some push. The US has suspended the imposition of tariffs for 90 days to July. To be sure, the two countries are also negotiating a bilateral trade agreement, which could be unveiled in July.
Not a full-blown recovery
“Economic activity in the fourth quarter is expected to remain resilient, supported by strategic frontloading of inventories by firms ahead of reciprocal tariff implementations and increased economic activity during the Maha Kumbh celebrations,” said Rajani Sinha, chief economist at CareEdge Ratings.
The Maha Kumbh took place in Prayagraj from January 13 to February 26.
“Catch-up in government spending, consumption pick-up on easing inflation, stronger farm output and positive lead indicators on rural demand are expected to help growth trends,” said Radhika Rao, senior economist at DBS Bank.
Lower inflation is seen bolstering real growth.
“The deflator will be a little more supportive as both wholesale and retail inflation eased, which will give little boost to real growth,” said Gaura Sengupta, chief economist at IDFC First Bank.
On average, wholesale and retail inflation was at 2.3% and 3.7%, respectively, in the fourth quarter. That’s down from 2.5% and 5.6% in the third quarter.
The National Statistical Office (NSO) will release the official GDP figures for Q4 and provisional estimates for FY25 on May 30.
Some high-frequency indicators suggest the recovery is still not full-blown — capital expenditure is lagging behind, urban demand is tepid, and corporate earnings are muted. “While we expect an improvement from 3Q to 4QFY25, asharper rebound is restrained by a weak credit growth impulse, and tight financial conditions in that quarter,” said Rao.
US tariff risks
The US has said it will impose 26% duty on Indian goods. While this has been paused for 90 days until July 9, the baseline tariff of 10% remains in place.
While rural demand is showing signs of recovery, urban consumption lags behind.
“Slowdown in real urban wage growth and reduction in savings buffer had an impact on urban consumption,” said Sengupta.
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