India GDP Data To Show Rebound, But Can Growth Sustain?

India’s economy may have rebounded in October-December, with GDP growth likely at 6.3%, up nearly a percentage point from July-September’s 5.4%. However, the recovery may remain driven more by public spending than private demand.

A poll of media and wire forecasts shows a consensus of 6.3%, though Bloomberg estimates 6.2%. The statistics ministry’s data release on Friday will also include revised estimates for past fiscal years, which could help refine the long-term growth trajectory.

The release includes the second advance estimate for 2024-25, the first revised estimate for 2023-24, and the second revised estimate for 2022-23. 

In the previous financial year, GDP growth in the third quarter was 8.6%.

The key driver behind the bounce is likely a surge in government expenditure. Central government spending may have grown 20% year-on-year in the quarter, with capital outlays possibly surging 48%. State governments also appear to have accelerated investment, potentially boosting public capital expenditure across the board. This policy-driven support may contrast with still-weak private consumption, which may not have delivered a decisive post-festival surge.

Rural demand appears to have improved, as indicated by higher FMCG sales, tractor sales, and diesel consumption, but urban spending likely remained mixed.

Manufacturing may have seen modest improvement, with industrial output growth edging up to 3.3%, while services likely held steady near 7.1%. Corporate results suggest stronger gross value-added growth, which may indicate resilience in the business sector even as household consumption lags.

Yet the broader question remains—how sustainable is growth when the private sector seems hesitant? Wealth concentration and sluggish job creation suggest that a strong, self-sustaining consumption cycle remains elusive.

The government projects GDP growth of 6.4% in 2024-25, but many economists expect it slightly lower at 6.2%.

RBI Policy

The GDP data will also be watched for monetary policy implications. With inflation largely contained, the RBI’s Monetary Policy Committee could opt for another 25 basis-point rate cut in April to stimulate demand. Governor Sanjay Malhotra, in the latest MPC minutes, highlighted the need for continued support for private consumption and investment to sustain economic growth. The RBI foresees 6.7% growth in 2025-26, driven by what it sees as stronger industrial activity, resilient services exports, and a gradual recovery in household consumption.

India’s long-term challenge remains: while 6.5% growth may be solid, it is unlikely to be enough to generate sufficient well-paying jobs. With next fiscal year’s growth projected in a similar range, policymakers may need to look beyond short-term stimulus to build a self-sustaining economy without excessive state intervention.