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India's economy is expected to see a boost in Q4FY25, supported by a sustained increase in government spending and capital expenditure (Capex), alongside a pickup in consumption driven by the Maha-Kumbh and wedding season, according to a report by Union Bank of India.
The report added that the Reserve Bank of India (RBI) has continued to support growth with rate cuts, liquidity provisions, and regulatory adjustments, including the reversal of macroprudential tightening. These measures, combined with the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) Micro, Small & Medium Enterprises (MSME) scheme, are set to spur credit growth in the coming months. However, the report pointed out the key risks adding that ongoing tariff wars and escalating geopolitical tensions, which could dampen the economic recovery. India's economic growth registered rate of 6.2 per cent in Q3FY25. However, signs of recovery are beginning to emerge, with the report projecting a 7.6% growth in Q4FY25, suggesting a potential turnaround in the months ahead. "India's GDP grew by 6.2% in Q3FY25 after a 7-quarter low of 5.6% (revised upwards from 5.4%) in Q2FY25. The yearly FY25 is revised from 6.4% to 6.5%, thereby we expecting a 7.6% growth in Q4FY25 to achieve the same," the report adds. The Gross Value Added (GVA) which is a measure of the total value created by the businesses grew by 6.2 per cent in Q3FY25 from 5.8 per cent in Q2FY25, due to robust growth in agriculture and industry, especially manufacturing activities during the quarter. The weak GDP numbers compared to the last years can be gauged from the consumption in the economy and the latest stock market performance. Despite the deceleration in growth, the report added that the government's fiscal spending, along with a resurgence in consumption fueled by seasonal factors in the coming months. In addition despite the uncertain global outlook, India's economic momentum is expected to sustain, driven by strong rural demand and a revival in urban consumption, as highlighted by Chief Economic Adviser Anantha Nageswaran on Friday The report also mentioned that Reserve Bank of India (RBI) has taken steps to support growth through liquidity injections and an accommodative monetary policy. In February 2025, the RBI cut interest rates by 25 basis points, aiming to revive investment and consumption. Additionally, the central bank has been actively managing liquidity through Open Market Operations (OMOs) and implementing regulatory leeways to encourage credit growth, particularly for MSMEs and non-banking financial companies (NBFCs). (ANI)
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