India’s GDP is expected to grow at 6.6% in the October-December period of 2024-25, a slower pace compared to the 8.6% growth in the same quarter of 2023-24. Despite the deceleration, the economy remains robust, supported by agriculture, government spending, and services, according to a Bank of Baroda report released on Tuesday.
The report highlights that the government’s increased capital expenditure (capex) is a major driver of economic stability. Capex surged to 47.7% in Q3 FY25 from 24.4% in Q3 FY24, boosting construction activity in sectors such as highways, ports, and railways, thereby creating more jobs and incomes.
The financial sector remains positive with higher credit and deposit growth, while rural demand is improving, as evidenced by rising tractor and two-wheeler sales. Agriculture growth is expected to accelerate to 4.5% in the third quarter, up from 0.4% in Q3 FY24, driven by better foodgrain production and robust rabi acreage.
The services sector is projected to grow at 6.9% in Q3 FY25, slightly lower than the 7.1% growth in Q3 FY24. Trade and hospitality are also expected to grow at 6.9%, supported by the “experience economy,” while the financial sector is forecast to grow at 6.5%.
However, the report points out that manufacturing and industrial growth are moderating, partly due to a high base effect. Industrial growth is expected to slow to 5.9% from 10.2% in Q3 FY24, and manufacturing growth is projected to decline to 6% from 11.5%, impacted by lower corporate earnings in sectors such as crude oil, steel, and auto. The mining sector growth is also expected to drop to 3% from 7.5% in the year-ago period.
The report also highlights the downside risks from global economic uncertainty due to geopolitical tensions, trade wars, and economic fragmentation. While India’s economy remains strong, it is impacted by global challenges, putting pressure on the currency and the external sector.
