CareEdge Analysis: Key Factors Impacting India’s GDP Growth – A Look at Agriculture to Exports
India’s Q4 GDP Growth Projection at 6.8%
India’s GDP growth for the fourth quarter is estimated at 6.8%, driven by robust performances in agriculture, transportation, and construction, despite varied trends in consumer spending and a decrease in government expenditures and exports. According to CareEdge’s analysis, India’s actual GDP growth for the last quarter of fiscal year 2025 stands at 6.8%.
Continued Economic Resilience in 2025
Despite slight downward adjustments from agencies like Moody’s and the United Nations, India is anticipated to maintain its position as one of the fastest-growing economies in 2025, bolstered by resilient consumer spending, government investments, and structural reforms. CareEdge has revised its full-year GDP growth forecast for FY25 to 6.3%, down from an earlier estimate of 6.4%. The GDP growth for FY26 is expected to be around 6.2%. According to the report, factors such as recovering rural demand, reduced tax burdens, lower policy rates, declining inflation, and hopes of favorable monsoon conditions are likely to enhance economic activities. A steady revival in consumption will be essential for a significant increase in corporate capital expenditure, even amid ongoing global uncertainties.
Economic Activity Indicators Show Positive Signs
Utilizing a machine learning approach via its CareEdge Economic Meter (CEM)—an index monitoring 40 high-frequency economic and policy indicators—CareEdge has noted an uptick in economic activities in Q4FY25, with the CEM growing by 3.0% year-over-year, an increase from 2.6% in Q3FY25. Provisional GDP data for the fourth quarter and FY25 is set to be published on May 30, 2025.
Sectoral Performance Impacting GDP Growth
CareEdge has presented insights into the performance of key sectors, indicating areas of improvement, mixed trends, and deceleration. The anticipated GDP growth in Q4 is likely supported by sustained forward momentum in sectors like agriculture, hospitality, transportation, and construction. They noted that festivities related to the ‘Maha Kumbh’ are expected to bolster the hospitality and transportation sectors.
Areas of Improvement
Agriculture Sector
The agricultural sector has demonstrated resilience, with rabi sowing of food grains exceeding last year’s figures by 2%. Additionally, domestic tractor sales have surged by 23.4% year-over-year in Q4FY25, significantly outperforming the 13.5% growth recorded in Q3. Fertilizer sales have similarly increased by 5.4% in January-February 2025, surpassing the previous quarter’s growth of 0.4%.
Trade, Hotels, and Transport
According to data from CareEdge, domestic air passenger traffic rose by 12% year-over-year in Q4FY25, compared to 11.4% in Q3. While foreign tourist arrivals saw a slight decline of 1.3% YoY in Q4FY25—less severe than the 3% contraction in Q3—travel activity rebounded due to events such as the Kumbh Mela and major concerts. Additionally, toll collections jumped by 17.2% in Q4, up from 12.7% in the previous quarter, and e-way bill collections increased by 19.4% YoY in Q4 FY25, compared to 16.9% YoY in Q3.
Mining Sector
In the mining category, the Index of Industrial Production (IIP) for mining registered a growth of 2.1% YoY in Q4FY25, increasing from 1.8% in Q3.
Mixed Trends Observed
Consumption Demand
Rural demand is anticipated to benefit from favorable agricultural outcomes and decreasing inflation; however, urban demand presents a more ambiguous scenario. Gross domestic GST collections edged up slightly to 9.7% YoY in Q4FY25 from 9.5% YoY in the last quarter. The growth in IIP for consumer durables averaged 5.8% during the quarter, while consumer non-durables saw a decline of 2.2% in Q4, indicating a downward trend in consumption. Moreover, passenger vehicle sales grew by 2.3% in Q4FY25, down from 4.5% in Q3, and two-wheeler sales also decelerated to 1.4%, a drop from 3% YoY in the previous quarter.
Construction Sector
Although capital expenditure from the central government decreased by 4% during January-February 2025, CareEdge forecasts that spending increases towards the end of Q3FY25 will likely support construction activity in Q4 due to typical lag effects. Furthermore, finished steel consumption rose by 11% year-over-year in Q4, surpassing the 7.8% growth in Q3. Improvements were also seen in the IIP for infrastructure and construction goods, although highway construction and bitumen consumption fell by 8.4% and 3.8% YoY, respectively, in Q4.
Manufacturing Sector
In the manufacturing domain, IIP growth eased to 3.9% YoY in Q4FY25, compared to 4.5% in Q3. Manufacturing for personal vehicles and cement saw improvements of 6.4% YoY and 12.3% YoY, respectively. However, an increase in inventory ahead of reciprocal tariffs has benefited certain sectors, such as electronics, according to CareEdge.
Areas Experiencing Deceleration
Government Expenditure
The current economic slowdown is attributed largely to a reduction in central revenue expenditure, which contracted by 4.7% in January-February 2025. Central capital expenditure mirrored this trend with a decline of 4% during the same period.
Financial and Real Estate Sectors
In the review period, growth in non-food credit slowed to 12.2% YoY in Q4, down from 12.3% in Q3, chiefly due to a reduction in retail credit expansion. Additionally, life insurance first-year premium collections fell by 4.3% YoY in Q4, while major state governments experienced a 4% YoY contraction in stamp and registration revenue as of January-February 2025.
External Trade Trends
In external trade, service export growth remains strong but has decreased to 14.1% in Q4, down from 17.9% in Q3. Conversely, merchandise exports contracted by 0.3% YoY in Q4, compared to a 4.4% YoY increase in Q3. “The lackluster performance in goods exports is primarily due to plummeting oil exports (-34% YoY) and slowing non-oil exports (7.4% YoY),” CareEdge noted.
