India's growth becoming more balanced as private consumption's share in GDP rises

The good news is that India’s growth is becoming more balanced as private consumption’s share in GDP rose in fiscal 2025, according to a Crisil report.

The mild revision of 10 basis points (bps) in the second advanced estimate to 6.5 per cent takes the expected real GDP growth this fiscal closer to the average of 6.6 per cent seen in the decade pre-pandemic.

“And this is over a sharp upward revision of 100 bps in the previous year’s growth to 9.2 per cent,” said Dharmakirti Joshi, Chief Economist, Crisil.

“We expect the GDP growth at 6.5 per cent next fiscal, supported by normal monsoons, lower food inflation and rate cuts of 75-100 basis points in the current cycle that began earlier this month,” he mentioned.

As anticipated, public and household investments were the faster-growing investment components in fiscal 2024.

The financial flexibility and low leverage that corporates enjoy are yet to translate into healthy investments.

The ongoing tariff wars and fear of dumping from China keep the corporate sector cautious on investments.

“The complexity of risks from tariff actions – already initiated and likely to be followed by more such measures in the coming months – is evolving and creates a downside bias to our forecasts,” said Joshi.

The GDP growth accelerated to 6.2 per cent in the third quarter (October-December) of 2024-25, up from a revised figure of 5.6 per cent in the second quarter of the financial year.

The growth rate for the financial year 2024-25 is now estimated at 6.5 per cent while the economic growth rate for 2023-24 has been revised to a 12-year high of 8.2 per cent.

Meanwhile, the fiscal deficit for the first 10 months of the current financial year (April-January) stood at Rs 11.70 lakh crore or 74.5 per cent of annual estimates.