India’s economy grew by 6.5 per cent in real terms in FY 2024–25, expanding to $3.9 trillion from $3.6 trillion in the previous fiscal. Nominal GDP growth stood at 9.8 per cent, reflecting moderate inflation. The growth exceeded expectations, driven by strong consumption and public investment. However, experts remain cautious about investment trends in the coming year.
India’s FY26 GDP forecast at 6.5%, risks remain: Dharmakirti Joshi
Dharmakirti Joshi, Chief Economist at Crisil, said, “Consumption growth outpaced GDP, primarily driven by robust rural demand supported by a strong agricultural sector. A sharp catch-up in investment growth in the last quarter also brought annual investment growth above GDP growth.”
Looking ahead to FY26, Joshi expects consumption to remain strong, supported by a normal monsoon, interest rate cuts by the RBI, and middle-class income tax relief. “These factors are expected to bolster urban consumption and complement the strong rural demand,” he said.
However, he warned that investment demand could weaken due to global uncertainty and slower public spending. “Net-net, we expect India’s GDP to grow at 6.5 per cent in fiscal 2026, with risks tilted downwards,” Joshi added.
FY26 likely to be affected by global uncertainties: Madhavi Arora
Madhavi Arora, Chief Economist at Emkay Global Financial Services, said the 7.4 per cent Q4 growth partly reflects back-loaded spending by the Centre and states, especially on public capital expenditure.
“As a whole, the growth has been in line with government estimates, with capital formation staying broadly steady,” she said. However, she cautioned that FY26 will likely be affected by global uncertainties, which may hurt investment intentions and weigh on urban consumption.
“FY26 will be impacted by global uncertainties weighing on near-term investment intentions, while easing urban incomes will weigh on private consumption. However, a part of this could be countered by continued monetary easing on both policy rates and regulatory frameworks, even as fiscal policy will have limited growth-pushing levers through conventional easing,” she added.
Full-year growth of 6.5 per cent is lowest in four years: Sankar Chakraborti
Sankar Chakraborti, MD & CEO of Acuité Ratings & Research, said the Q4 growth of 7.4 per cent reflects a cyclical rebound, but the full-year growth of 6.5 per cent — the lowest in four years — points to underlying structural issues.
He highlighted the construction sector’s standout performance, with 10.8 per cent growth in Q4, and noted that public administration services grew by 8.7 per cent. The primary sector also rebounded, supported by rural recovery.
“We continue to expect the RBI to deliver two more 25 bps rate cuts this year, in June and August,” he added. “The nominal GDP growth of 9.8 per cent against real growth of 6.5 per cent implies a GDP deflator of around 3.3 per cent, which means inflation is range-bound. This growth number, coupled with the current backdrop of low inflation, creates some monetary space.”
ICRA sees slight dip in FY2026 GDP growth
ICRA noted that private consumption in Q4 remained uneven, while government consumption declined after two consecutive quarters of growth. The agency also highlighted significant discrepancies in recent data, suggesting future revisions may follow.
Looking ahead, ICRA expects domestic demand to remain resilient, supported by tax cuts, monetary easing, and a favourable monsoon. However, it projects a slightly slower GDP growth rate of 6.2 per cent in FY26, down from 6.5 per cent in FY25.
“The outlook for merchandise and IT exports, as well as private capex—especially in export-oriented sectors—appears muted, although the relative tariff scenario may evolve as the year progresses. At present, ICRA forecasts GDP growth to dip slightly to 6.2 per cent in FY2026 from 6.5 per cent in FY2025,” the agency added.
PHDCCI pins FY26 growth hopes on agri recovery, public investment
The PHD Chamber of Commerce and Industry (PHDCCI) welcomed the Q4 GDP growth of 7.4 per cent, saying it reinforces India’s position as one of the fastest-growing major economies.
PHDCCI President Hemant Jain highlighted that the construction sector grew by 9.4 per cent in FY25, making it the fastest-growing sector.
Jain expects growth to strengthen further in FY26 through agricultural recovery and sustained public investment. “Going forward, we anticipate stronger GDP growth aided by improved agricultural output, sustained infrastructure activity, and strong domestic consumption. Continued government focus on public investment and structural reforms is expected to catapult India’s growth momentum in FY2026,” he said.
Moderating household liabilities may boost net savings ahead: Rangan
Anitha Rangan, Economist at Equirus Securities, noted a slight surprise in nominal GDP, which was revised downward to 9.8 per cent from earlier estimates. The GCF-to-GDP ratio dropped to 32.9 per cent, suggesting moderating capital expenditure.
She pointed out that household savings also declined slightly, from 18.6 per cent to 18.1 per cent in FY24, accompanied by a rise in net liabilities. “Prospectively, with household liabilities moderating, net savings should see an improvement,” she said.
Rangan added that while manufacturing remains weak, most sectors are showing a steady recovery from pre-pandemic levels. She sees structural growth setting in, even if it’s not yet at full potential.