India’s economic growth is expected to accelerate in the fourth quarter (Q4) of the current fiscal year, driven by a significant increase in government capital expenditure (capex) and additional spending linked to the Maha Kumbh congregation, according to Chief Economic Adviser (CEA) V Anantha Nageswaran. The government expects GDP growth to reach 7.6% in Q4, a level necessary to achieve an overall 6.5% growth rate for the 2024-25 financial year.
Q3 GDP Growth Slows to 6.2%
The third-quarter GDP growth slowed to 6.2%, a sharp decline from 9.5% recorded a year ago. The slowdown was mainly attributed to weak performance in mining, manufacturing, and several other sectors, except for agriculture, which showed resilience.
Despite this, the National Statistics Office (NSO) revised its full-year GDP growth estimate upward to 6.5%, compared to 6.4% in its first advance estimate released in January 2024.
To meet the 6.5% full-year GDP target, the economy must grow by 7.6% in Q4, a goal that some experts consider optimistic. However, CEA Nageswaran believes it is realistic and achievable given the ongoing government initiatives.
Key Drivers of Q4 Economic Growth
1. Government Capital Expenditure (Capex)
The government has significantly increased capital expenditure, which plays a crucial role in economic growth by boosting infrastructure projects, employment, and industrial activity. This higher spending is expected to contribute substantially to Q4 growth.
2. Maha Kumbh Congregation Impact
The Maha Kumbh Mela, one of the largest religious gatherings in the world, is generating additional economic activity due to increased tourism, transport, hospitality, and retail spending. The event is expected to bring a temporary economic boost to key sectors.
3. Positive Domestic Factors
Despite external global challenges, there are incremental positive factors within India’s economy that support growth, including:
- Strong rural demand
- Revival in urban consumption
- Better kharif production and strong rabi sowing
- Higher water reservoir levels, improving agricultural output
Stock Market Reaction and Global Factors
On the same day as the GDP announcement, Indian stock markets witnessed a sharp decline. The Sensex and Nifty tumbled nearly 2%, mirroring losses in global markets. The downturn was primarily due to the announcement of an additional 10% tariff on Chinese products, which rattled investor confidence.
However, CEA Nageswaran downplayed short-term market fluctuations, advising investors to focus on India’s long-term economic potential rather than immediate stock movements.
India’s Economy on Track to Cross $4 Trillion
Looking ahead, the Indian economy is expected to cross the $4 trillion mark in FY25. The nominal GDP for 2024-25 is projected to reach ₹331.03 lakh crore, reflecting a 9.9% growth rate from ₹301.23 lakh crore in 2023-24.
This milestone will further solidify India’s position as one of the fastest-growing major economies in the world.
Inflation Trends and Economic Outlook
CEA Nageswaran noted that inflation is trending downward, easing concerns about rising prices. Factors such as:
- Seasonal winter correction in vegetable prices
- Better agricultural output
- Government policies focusing on MSMEs, investments, and exports
These elements are expected to support lower food inflation and sustained economic momentum.
Despite uncertainties in global trade policies, India’s economy is well-positioned for steady growth, with strong domestic demand and strategic government initiatives playing a crucial role.
India’s economic growth outlook remains positive, with Q4 GDP expected to reach 7.6%, supported by increased government spending and economic activity from the Maha Kumbh event. While short-term market fluctuations and global uncertainties persist, the broader economic fundamentals remain strong, positioning India for continued expansion.
With a projected nominal GDP of ₹331.03 lakh crore in FY25, India is on track to cross the $4 trillion milestone, further strengthening its global economic standing.
