India’s GDP Growth Outlook for Q3FY2025: Boosted by Government Spending & Festive Consumption

India’s GDP growth in Q3FY2025 is expected to show an upward bias and is expected to be in the range of about 6.3-6.4%, primarily driven by increased government spending and improved household consumption during the festive season

Key Drivers

Government capital expenditure surged to ₹2.7 trillion, marking about a 30% increase compared to the average of the first two quarters which was a bit muted due to general elections. This boost was aimed at stimulating economic growth amid uneven household consumption trends.

Private Final Consumption Expenditure (PFCE), which constitutes ~58% of GDP, is expected to rise to 6.4% in Q3, following moderation in Q2 (5.4%), benefiting from festive season demand

Agricultural output remained strong, supported by favorable monsoons and higher Kharif crop yields, positively impacting rural consumption.

The higher consumption (due to the festive season), higher government capital expenditure, and better agri-produce also helped the services sector in Q3FY2025.

Besides, services exports have also shown upward trend in Q3FY2025

While long-term GDP sustainability depends on income growth, job creation, and private sector investment, the Q3FY2025 growth outlook remains positive, largely supported by public expenditure, conducive monsoon conditions leading to higher output in major Kharif crops, strong performance of the services sector, and services export.