GDP growth records best result in a year in January–March

Economy tops expectations: GDP growth gathered momentum to 7.4% year on year in January–March, up from 6.4% in October–December and marking the fastest expansion in a year. The reading topped market expectations and was bolstered by an upswing in investment and net trade. The print means GDP grew 6.5% over FY 2024, weaker than the 6.9% per year average expansion seen in the 10 years before the pandemic.

Fixed investment and net trade drive upturn: Fixed investment growth picked up to 9.4%, following the 5.2% increase recorded in the previous quarter. Moreover, the contribution to GDP of net trade rose from 2.8 percentage points to 3.7 percentage points. The stronger net trade position was driven by a steeper 12.7% fall in imports of goods and services (October–December 2024: -2.1% yoy), marking the worst reading since Q3 2020; the sharper decline outweighed the impact of growth of exports of goods and services slowing to 3.9% from October–December 2024's 10.8% expansion. Less positively, private consumption growth fell to 6.0%, marking the weakest expansion since October–December 2023 (October–December 2024: +8.1% yoy). Government spending dropped 1.8% (October–December 2024: +9.3% yoy), largely due to a constitutional freeze on spending ahead of February’s elections.

Panelist insight: EIU analysts commented: “We maintain our forecast for real GDP growth to soften further to 6.2% in 2025/26, given our expectations for a more challenging external environment and only a gradual recovery in private investment. The central bank’s ongoing monetary policy easing, income tax cuts and continued public infrastructure spending will provide a backstop for growth.” Nomura’s Aurodeep Nandi and Sonal Varma said: “We revise up our FY26 GDP growth forecast to 6.2% y-o-y (5.8% earlier) vs 6.5% in FY25, below the RBI’s estimate (6.5%). We believe growth is in a downtrend, due to weak urban consumption, slow private capex, weak global trade, and an influx of Chinese imports. Low inflation, accommodative policies and good monsoons are positive.”

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