India's Q3 GDP shows upward bias due to high govt spending, improved consumption

Government capital expenditure surged to Rs 2.7 lakh crore, marking about a 30 per cent 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 per cent of GDP, is expected to rise to 6.4 per cent in Q3, following moderation in Q2 (5.4 per cent), benefiting from festive season demand,” said Mahendra Patil, Founder and Managing Partner, MP Financial Advisory Services.

Agricultural output remained strong, supported by favourable 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 Q3 FY25. Besides, services exports have also shown an upward trend in Q3 FY25, he mentioned.

The SBI economists have pegged India’s GDP growth at 6.2-6.3 per cent for Q3 (October-December) of 2024-25 driven by buoyant demand and Capex trends along with the increase in EBIDTA and corporate GVA recorded by India Inc.

According to a Bank of Baroda report, India’s GDP is expected to grow at 6.6 per cent in the October-December period which remains robust with support from agriculture, government spending, and services.

The increase in the government's capital expenditure (capex) is a major driver of economic stability while the financial sector and rural demand show resilience, the report pointed out.

While long-term GDP sustainability depends on income growth, job creation, and private sector investment, the Q3 FY25 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, said experts.