India's slowdown storm seems to have passed, with Q3 real GDP growth settling at 6.2%, breaking away from the 7-quarter-low of 5.6% seen in Q2.
The uptick was driven by the agriculture sector, private consumption and government spending.
As for the full fiscal year FY25, the second advance estimates released Friday pegged growth at 6.5%, in line with consensus estimates of about 6.4%.
While Q3 data indicates that we are emerging from the valley of gloom, it's unlikely that we are headed towards an economic miracle next fiscal. Both the RBI and the Economic Survey have pegged FY26 growth below 7% and given that global growth prospects remain uncertain with US President Donald Trump threatening to upend trade with tariffs, the much-desired 8% expansion remains almost godlike in its distance.
That said, the National Statistics Office's latest data dispatch was all about data revisions. The first revised estimates for FY24 show real GDP growth rate at 9.2% -- the highest in the previous 12 years barring FY22. The growth was led by double-digit growth rates in the manufacturing sector at 12.3%, construction sector at 10.4% and financial, real estate & professional services sector at 10.3%.
Likewise, the final estimates for FY23 show growth at 7.6%. Lastly, FY25, Q2 GDP growth rate too has been modestly revised upwards to 5.6%, as against 5.4% projected earlier.
In absolute numbers, real GDP for FY25 is pegged at Rs 187.95 lakh crore as against the first revised estimates of Rs 176.51 lakh crore. In Q2, real GDP is estimated at Rs 47.17 lakh crore compared to Rs 44.44 lakh crore during the same period last year.
Coming to the sub-components of national output, it seems as though the troubles of the economy are moving from one shoulder merely to land upon the other. For instance, if the first two quarters of FY25 saw agriculture and mining suffering the slowdown blues, manufacturing and services will likely bear the brunt during the second half. For the full fiscal FY25 though, while agriculture sector turned the corner, the industry and services sector have miles to go. On a sequential basis though, all three sectors performed relatively better.
In FY25, agriculture is expected to turn in 4.4% growth as against 2.7%, followed by mining & quarrying at 4.6% compared to 2.7% in FY24. As for Q3, agriculture sector registered 5.2% growth as against 1.8% growth seen during the same period a year ago. Sequentially too, the sector fared better than Q2 when growth stood at 3.6%. So did mining & quarrying that registered 5.6% growth as against 1.7% in Q3, FY24.
The biggest setback is from the manufacturing sector, whose growth is projected to slow down to 4.3% in FY25 as against the robust 12.3% growth in FY24. Likewise, electricity, and construction sectors too are witnessing a downturn with growth projected at 6% and 8.6%, respectively, as against FY24's 8.6% and 10.4%, respectively. The projected growth rates don't provide much cheer, but they are a lifeline, preventing the economy from a deeper slowdown.
As for Q3, manufacturing sector seems like a broken branch, with a dismal growth of 3.5%, as against a healthy double-digit growth of 14% in Q3, FY24. Similarly, electricity, and other utility services saw 5.1% compared to 10.1%, while construction sector ended Q3, FY25 with 7% growth as against 10% growth in Q3, FY24.
The services sector too is continuing the trend of slow burn, with growth of sub-sectors like trade, hotels, and financial, real estate and others estimated at 6.4% and 7.2%, respectively, compared to FY24's 7.5% and 10.3%, respectively. As for Q3, trade, hotels, and others saw 6.7% growth, lower than 8% seen last year, while financial, real estate & professional services registered 7.2% growth compared to 8.4% last year.
Private consumption recorded 6.9% growth, better than 5.7% growth seen during the same period last year, while government expenditure grew by 8.3% in Q3, FY25 as against 23% a year before. Investments registered 5.7% growth as against 9.3%. Undeniably, Q3 growth was driven by government expenditure, with the Centre ending the practice of lean rations. If the first two quarters saw only 37.7% of the budgeted capital spending, in Q3 that number jumped to 61.7%.
At 6.5%, India is still the fastest-growing major economy, but needs to do much more to reach the government's ambition of converting the country into a developed nation by 2047.
