Q3FY25 GDP growth shows FY25 stress is for real

3 Mar 2025 , 09:20 AM

FY25 SHOWS PRESSURE, BUT NOT ALL THAT BAD

On Friday, 28-Feb 2025, the MOSPI put out 2 important sets of data. Firstly, the Q3FY25 GDP growth in real terms was pegged 6.2%. This may look lower than the previous year, but is surely better than the 5.6% real GDP growth recorded in Q2FY25. Also, Friday saw the release of the second estimate of FY25 GDP growth at 6.5%, which is certainly betting on sustained recovery in the fourth quarter of FY25. But more important was the revision to final growth in real GDP for FY24 to 9.2%. This is the best real GDP growth achieved by the Indian economy in the last 12 years. Obviously, on a large base, the growth rate in FY25 is likely to come under pressure; although 6.5% is still good by global standards. Let us first look at the key estimates of FY25 (second estimates) of GDP and then turn to the Q3 actual GDP growth data in particular.

REAL GVA AND REAL GDP FOR FY25 (SECOND ESTIMATE)

The table below captures the sector wise break up of real GDP (net of inflation). FY23 is the final estimates, FY24 is first revised estimate and FY25 is second advance estimate.

Sector	FY23 (₹ in Crore)	FY24 (₹ in Crore)	FY25 (₹ in Crore)	YOY (%) FY24	YOY (%) FY25
Primary Sector	26,25,711	26,97,294	28,15,137	2.7%	4.4%
Agriculture, Livestock, Forestry	23,05,978	23,67,287	24,76,032	2.7%	4.6%
Mining & Quarrying	3,19,733	3,30,007	3,39,104	3.2%	2.8%
Secondary Sector	41,70,940	46,46,499	49,14,983	11.4%	5.8%
Manufacturing	25,16,364	28,25,935	29,47,186	12.3%	4.3%
Electricity, Gas, Utility Services	3,52,331	3,82,776	4,05,840	8.6%	6.0%
Construction	13,02,245	14,37,788	15,61,957	10.4%	8.6%
Tertiary Sector	80,81,377	88,07,683	94,49,723	9.0%	7.3%
Trade, Hotels, Transport	27,85,740	29,94,536	31,85,439	7.5%	6.4%
Financial, Professional Services	34,59,277	38,14,586	40,89,648	10.3%	7.2%
Public Administration, Defence	18,36,360	19,98,561	21,74,635	8.8%	8.8%
Real Gross Value Added (GVA)	1,48,78,028	1,61,51,477	1,71,79,842	8.6%	6.4%
Real Gross Domestic Product (GDP)	1,61,64,913	1,76,50,591	1,87,95,095	9.2%	6.5%

Data Source: MOSPI

Here are some of the key takeaways from the real GDP (net of inflation) for the last 3 years. The last 2 columns show the yoy growth rate.

• The components presented here are for gross value added (GVA). The GVA is the GDP excluding the impact of indirect taxes and subsidies, so it is gives a better picture of output growth. At 6.5%, the FY25 GDP growth is estimated to be 270 bps lower than the revised real GDP growth rate of FY24.
• Agriculture, livestock, and forestry has seen growth bounce from 2.7% to 4.4%; 60 bps better than the first estimate. This is thanks to a good monsoon, better acreage and better MSPs for farmers. Apart from a bumper Kharif, even the reservoir levels indicate a robust Rabi season too; and the impact is evident on food inflation.
• Mining and manufacturing have taken it on the chin. Real manufacturing output has fallen from 11.4% to 5.8%. This can be attributed to weak global demand as well as a slowdown in capex growth in FY25.
• If you look at tertiary (services) sector, public utility services have been flat compared to last year, while the trade, hotels, and the financial services space are sharply lower. This is more of a derived demand from the secondary sector.

Despite 5.6% growth in Q2 and 6.2% growth in real GDP in Q3, the MOSPI is quite aggressive in its estimates. It is pegging full year growth in real GDP at 6.5%, which means an above 7% growth in Q4FY25. It remains to be seen if that can be fulfilled.

NOMINAL GVA AND NOMINAL GDP FOR FY25 (SECOND ESTIMATE)

While real GDP is the standard measures of economic growth, nominal GDP (pre-inflation) is a good measure of jobs, fiscal deficit ratio and economic activity. Check the table below.

Sector	FY23 (₹ in Crore)	FY24 (₹ in Crore)	FY25 (₹ in Crore)	YOY (%) FY24	YOY (%) FY25
Primary Sector	49,60,015	54,10,210	59,57,032	9.1%	10.1%
Agriculture, Livestock, Forestry	44,49,332	48,77,867	54,13,356	9.6%	11.0%
Mining & Quarrying	5,10,682	5,32,343	5,43,676	4.2%	2.1%
Secondary Sector	63,15,335	70,89,650	75,55,002	12.3%	6.6%
Manufacturing	35,34,867	39,21,596	41,49,054	10.9%	5.8%
Electricity, Gas, Utility Services	6,09,068	7,66,435	7,96,692	25.8%	3.9%
Construction	21,71,401	24,01,618	26,09,255	10.6%	8.6%
Tertiary Sector	1,33,71,348	1,49,13,028	1,65,02,859	11.5%	10.7%
Trade, Hotels, Transport	44,12,008	48,28,505	52,63,368	9.4%	9.0%
Financial, Professional Services	56,00,439	62,44,153	68,83,780	11.5%	10.2%
Public Administration, Defence	33,58,901	38,40,370	43,55,711	14.3%	13.4%
Nominal Gross Value Added (GVA)	2,46,46,698	2,74,12,888	3,00,14,893	11.2%	9.5%
Nominal Gross Domestic Product (GDP)	2,68,90,473	3,01,22,956	3,31,03,215	12.0%	9.9%

Data Source: MOSPI

There are some key takeaways from the nominal GDP (pre-inflation) data. Firstly, the fall in the nominal GDP activity is not as sharp as the real GDP. For instance, the nominal GDP estimates for FY25 are just 210 bps lower than the revised estimate for FY24. That also means that inflation has had a sharp impact on the real GDP growth, especially food inflation. Secondly, nominal agricultural GDP is actually higher in FY25 compared to FY24; which means that agricultural and rural India has borne the brunt of the inflation. It also indicates that rural inflation may be far from over and the revival in demand for consumer goods based on rural demand may still have some distance to traverse.

REAL GVA AND REAL GDP FOR Q3-FY25 (DEC-24 QUARTER)

The table below captures the sector wise break up of real GDP (net of inflation) for the third quarter of FY25; and compared to the first and second quarters.

Sector	Q1-FY23 (₹ in Crore)	Q2-FY24 (₹ in Crore)	Q3-FY25 (₹ in Crore)	YOY (%) Q3-FY24	YOY (%) Q3-FY25
Primary Sector	6,39,363	5,40,923	8,50,955	1.8%	5.2%
Agriculture, Livestock, Forestry	5,49,086	4,75,911	7,68,351	1.5%	5.6%
Mining & Quarrying	90,277	65,012	82,604	4.7%	1.4%
Secondary Sector	11,81,982	11,72,717	11,78,422	12.4%	4.8%
Manufacturing	7,06,094	7,20,127	6,95,366	14.0%	3.5%
Electricity, Gas, Utility Services	1,05,981	1,02,970	96,301	10.1%	5.1%
Construction	3,69,906	3,49,620	3,86,755	10.0%	7.0%
Tertiary Sector	23,25,966	24,27,016	22,83,208	8.3%	7.4%
Trade, Hotels, Transport	6,89,144	7,57,307	8,23,895	8.0%	6.7%
Financial, Professional Services	11,25,613	11,22,726	9,05,185	8.4%	7.2%
Public Administration, Defence	5,11,209	5,46,984	5,54,127	8.4%	8.8%
Real Gross Value Added (GVA)	41,47,310	41,40,656	43,12,585	8.0%	6.2%
Real Gross Domestic Product (GDP)	44,41,986	44,92,230	47,16,992	9.5%	6.2%

Data Source: MOSPI

Here are some of the key takeaways from the real GDP (net of inflation) for the last 3 years. The last 2 columns show the yoy growth rate for Q3FY24 and Q3FY25 quarters.

• The real GDP growth in Q3FY25 at 6.2% is sharply lower than the 9.5% real GDP growth recorded in the corresponding quarter last year. The Q3 pressure is largely from manufacturing, which is down from 12.4% to 4.8% in the comparable third quarter.
• There are some diverse trends if you compare Q3 of the last two years. Agriculture has sharply turned around from 1.8% to 5.2%, which shows that the monsoon impact and Kharif output have been sharply better this year. However, there is sharp cut in Q3 manufacturing and a more modest fall in the services sector.
• Let us break up these stories a bit. In manufacturing; the pressure is seen across manufacturing output, electricity, utilities, and construction. In the services sector, the positive growth is again coming from public administration and defence, while trade, hotels and financial services are under pressure.

Needless to say, the full year estimate at 6.5% real GDP growth does look aggressive in the context of Q2 at 5.6% and Q3 at 6.2%. One has to wait and watch.

NOMINAL GVA AND NOMINAL GDP FOR Q3-FY25 (DEC-24 QUARTER)

The table below captures the sector wise break up of nominal GDP for the last 3 quarters, before considering the inflation impact. Check the table below.

Sector	Q1-FY23 (₹ in Crore)	Q2-FY24 (₹ in Crore)	Q3-FY25 (₹ in Crore)	YOY (%) Q3-FY24	YOY (%) Q3-FY25
Primary Sector	13,15,662	11,43,525	18,62,043	9.3%	13.0%
Agriculture, Livestock, Forestry	11,64,477	10,36,838	17,37,896	9.7%	14.5%
Mining & Quarrying	1,51,185	1,06,686	1,24,147	5.2%	-4.2%
Secondary Sector	18,22,466	17,82,979	18,22,262	13.8%	5.6%
Manufacturing	9,90,848	10,09,829	9,84,517	13.6%	5.6%
Electricity, Gas, Utility Services	1,99,822	1,92,114	1,98,251	21.9%	3.4%
Construction	6,31,796	5,81,036	6,39,494	11.7%	6.4%
Tertiary Sector	40,55,743	42,16,771	40,21,289	11.5%	11.2%
Trade, Hotels, Transport	11,21,530	12,52,146	13,72,655	10.8%	9.8%
Financial, Professional Services	18,64,574	18,74,681	15,51,225	10.6%	10.6%
Public Administration, Defence	10,69,640	10,89,944	10,97,409	13.8%	13.8%
Nominal Gross Value Added (GVA)	71,93,872	71,43,274	77,05,595	11.5%	10.2%
Nominal Gross Domestic Product (GDP)	79,07,699	78,38,967	84,73,867	12.9%	9.9%

Data Source: MOSPI

The message from the Nominal growth tables show that India is likely to cross ₹300 Trillion in FY25. However, with the rupee weakening to ₹87.50/$; the dollar GDP is likely to fall short of $3.5 Trillion.