India’s economy is projected to witness a significant boost in Q4FY25, driven by sustained government spending, increased capital expenditure (Capex), and a rise in consumption during the Maha-Kumbh and wedding seasons, according to a report from the Union Bank of India. This uptick comes on the back of various supportive measures from the Reserve Bank of India (RBI), including rate cuts, liquidity provisions, and regulatory adjustments, notably reversing macroprudential tightening. These efforts, combined with the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) MSME scheme, are expected to stimulate credit growth in the coming months.
Despite the challenges posed by ongoing tariff disputes and rising geopolitical tensions, which could pose risks to the recovery, signs of economic revival are emerging. The Indian economy grew at 6.2% in Q3FY25, up from a revised 5.6% in Q2FY25, indicating a potential recovery. The report projects that India’s GDP growth will accelerate to 7.6% in Q4FY25, which would be a strong indicator of an economic turnaround.
The Gross Value Added (GVA) for Q3FY25 grew by 6.2%, bolstered by solid performance in agriculture and manufacturing sectors. Although the economy faces challenges, particularly in consumption and stock market performance, government fiscal spending and a seasonal surge in demand are expected to sustain the economic momentum. Chief Economic Adviser Anantha Nageswaran also emphasized that India’s rural demand and revival of urban consumption would contribute to maintaining economic growth, despite global uncertainties.
Additionally, the RBI has continued to support the economy through accommodative monetary policies, including a 25 basis point rate cut in February 2025 and strategic liquidity management through Open Market Operations (OMOs), with a focus on promoting credit growth for MSMEs and non-banking financial companies (NBFCs).
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