India’s Q3 FY25 GDP growth printed broadly in line with expectations, at 6.2%
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India’s Q3 FY25 GDP growth printed broadly in line with expectations, at 6.2%. Within the internals, pace of investment growth has disappointed especially since the central government capex spending had picked up substantially in Q3 FY25. More so, FY25 growth estimated at 6.5%, rests on an implied GDP growth of 7.6% in Q4. This we fear maybe a tad optimistic, especially amidst the unfavourable statistical base that upward revision to FY24 GDP growth (by 100 bps) brings with it.
The support to private consumption via reduction in personal income taxes, is likely to play out FY26 onwards. As per our estimates, the rise in disposable income of middle-income earners could add ~60 bps to private consumption and ~20-30 bps to headline GDP growth, ceteris paribus. As such, for FY26, we continue to hold on to our GDP growth projection of 6.7%, additionally premised on government’s capex support, neutral ENSO conditions and rural recovery upholding momentum. However, global uncertainty amidst still unfolding tariff wars, and evolving geoeconomics and geopolitics could accord downside risks that remain on watch.