The Indian economy escaped with a whole skin amid the ongoing trade and terror tensions.
In FY25, the real GDP grew by 6.5%, while Q4 turned in 7.4%. Interestingly, Q4 growth numbers beat the consensus estimate of over 6.8%.
The annual estimates, meanwhile, are in line with both the RBI and the second advance estimates at 6.5%.
The surprise in Friday's data dispatch then is that there are no surprises with growth printing exactly as we've been warned all along. But growth projections for the current fiscal come with a large asterisk, thanks to global trade headwinds and terror tensions across the border. Even the government's monthly economic review revised the FY26 estimate downwards to 6.2% from 6.5% earlier.
Moreover, last fiscal's economic activity wasn't broad-based either.
On the expenditure side, while private consumption and investments held up well, government spending sank into the ground. Likewise, on the supply side, agriculture was back to its best behaviour, but economic harmony was shattered by the manufacturing sector that saw a whispering growth. The services sector fared well, but overall growth remains well below its potential. As a result, FY25 registered growth alright, but lacks the showbiz sparkle seen in FY24's 8.2% growth print.
In short, be it the quarterly, annual, or sub-component growth patterns, India's growth story is increasingly resembling this summer season -- three fine days followed by a thunderstorm. And India needs exactly the opposite, or a stable economic weather, to emerge as the fourth-largest economy with a projected GDP of $4.19 trillion in FY26.
According to the National Statistics Office's provisional estimates released Friday, in absolute numbers, the real GDP stood at Rs 187.97 lakh crore in FY25 as against Rs 176.51 lakh crore a year before, while real Gross Value Added (GVA) stood at Rs 171.87 lakh crore, registering a growth rate of 6.4%. Likewise, Q4 real GDP stood at Rs 51.35 lakh crore as against Rs 47.82 lakh crore in the corresponding period a year ago.
The agriculture sector bounced to its feet with 4.4% growth in FY25 compared to 2.7% in FY24. The mining and quarrying sector too fared well clocking 4.6% growth as against 2.7%.
However, it's the secondary sector comprising manufacturing, construction and electricity, and other utility services that tattooed a big warning sign. Its growth fell from 11.4% in FY24 to 6.1% in FY25. The biggest setback came from manufacturing, which seems to have lost its roar, turning in 4.5% in FY25, down from 12.3% in FY24. Likewise, electricity, gas, water supply and other utility services saw 5.9% growth compared to 8.9%.
While official data noted that the construction sector saw a 'record' growth rate of 9.4% in FY25, that's lower than FY24's 10.4%. The good news, though, is the construction sector's growth rate in Q4 at 10.8% that holds promise. Similarly, the primary sector registered a 5% growth rate in Q4, FY25 as against a dismal 0.8% growth seen during Q4 of the previous financial year, raising hopes that we may be nearing the gateway to the sunlit uplands of growth and prosperity.
Coming to the services sector, the headline growth rate declined to 7.2% in FY25 from 9% in FY24, confirming that households' discretionary spending remains rather limited. Within this, the public administration, defence and other Services’ sector saw the highest sub-component growth at 8.9%, followed by financial, real estate and professional services' sector at 7.2%.
Trade, hotels, and others turned in the lowest growth within the tertiary sector at 6.1%, lower than 7.5% in FY24. The services sector has the highest share of over 63% in GVA, and hence needs to pick up steam for growth to crack 7% and above.
Meanwhile, private consumption saw a 7.2% growth rate compared to a 5.6% growth a year before. Its share remains at 56.6% of the GDP. Puzzlingly, government expenditure slowed to a crawl at 2.3% growth in FY25 as against 8.1% in FY24. Accordingly, its share fell from 9.5% to 9.1% of the GDP. Likewise, investments, the missing link in India's growth story, which sprang to life last fiscal, slowed down to 7.1%.
This is despite a recent Ministry of Statistics survey, which showed a 66.3% rise in aggregate capex between FY22 and FY25, and new private investment announcements hitting Rs 14.4 lakh crore in Q4 FY25 -- the highest-ever recorded.
Notably, Chief Economic Advisor V Anantha Nageswaran reminded India Inc that India needs eight million additional jobs every year. He reiterated that the government was shifting focus from public-led growth to private-sector-driven expansion and urged the industry to focus on a capital-intensive model.
India's exports of goods and services hit an all-time high of $825 billion in FY25, growing by 6.01% over the previous year's $778.1 billion.
This historic growth comes despite global trade headwinds. What's unsettling, though, is the growth prospects in the current fiscal given the uncertainty over tariffs and the trade deal with the US.
