India's Economic Engine Roars: Q4FY25 GDP Beats Expectations as Inflation Retreats

Business News: India’s economic momentum accelerated in the final quarter of FY25. India has posted a stellar GDP performance in Q4FY25, marking a strong finish to the fiscal year. Supported by resilient domestic consumption, stable macro fundamentals, and easing inflation, the data suggests the Indian economy is firmly back on a high-growth track.

GDP Growth Surges Past Estimates

India's gross domestic product (GDP) grew at an impressive 8.2% in Q4FY25, outpacing analyst expectations that ranged between 7.3% and 7.8%. This growth has been attributed to a robust manufacturing sector, increased government capital expenditure, and a noticeable rebound in urban consumption. The services sector also recorded double-digit growth, further supporting the overall expansion. Notably, this is the highest quarterly GDP growth India has seen since Q2FY23. The sharp uptick underscores the effectiveness of fiscal and monetary measures aimed at economic revival post-pandemic and global slowdown.

Manufacturing and Services Lead the Rally

The manufacturing sector recorded a 9.6% rise, while the services sector, led by IT and financial services, expanded by 10.4%. These figures indicate broad-based growth, rather than being driven by a single sector. Economists believe the key driver is the combination of increased public infrastructure spending and improved consumer confidence, especially in urban areas. Even the agriculture sector, despite seasonal challenges, contributed moderately to the GDP, providing a holistic economic outlook.

Inflation Drops to 4.3%—A Two-Year Low

While GDP surged, inflation eased. Consumer Price Index (CPI) inflation dropped to 4.3% in Q4FY25, down from 5.1% in the previous quarter. This drop is largely credited to stable food prices, falling fuel costs, and efficient supply chain management by the government. The Reserve Bank of India (RBI) has welcomed the data, suggesting that policy tightening cycles might pause as inflation enters the comfort zone.

Investment and Demand See Renewed Strength

Private investments and capital formation increased by 6.8%, while household consumption rebounded with a 5.4% rise year-over-year. Sectors like auto, electronics, and real estate reported better-than-expected quarterly earnings. The positive sentiment has also translated into a bullish stock market, with benchmark indices scaling new highs after the GDP data release.

RBI Policy May Turn Neutral

With growth on an upswing and inflation easing, the Reserve Bank of India is now expected to maintain a neutral to dovish stance in its next monetary policy review. Experts say that India is well-positioned to be the fastest-growing major economy for FY26, with multiple engines of growth now synchronized. The focus may now shift towards ensuring sustainable growth while maintaining fiscal prudence.

Global Markets Take Note of India’s Performance

Global financial institutions like the IMF and World Bank have taken note of India’s remarkable Q4 numbers. Analysts believe that the Indian economy is entering a “Goldilocks phase”—not ”too hot, not too cold”—where growth is accelerating and inflation is controlled. India’s strong fundamentals are likely to attract greater FDI and global strategic interest in the months ahead.