India’s Q3 FY25 GDP growth is driven by rural demand and government spending, but it remains below expectations at 6.6%. Despite potential growth opportunities through tax cuts and lower capital costs, uncertainties regarding international trade could impact future expansion. Government expenditure continues to play a crucial role in stimulating the economy as analysts foresee gradual improvements in GDP growth moving forward.

India’s Q3 FY25 GDP growth reflects an increase driven by rural demand and government expenditures; however, it still falls short of the Reserve Bank of India’s projection for 6.8%. Despite being the fastest-growing major economy, India’s expansion is below the 8% growth rate deemed necessary for Prime Minister Modi to realize his 2047 development vision. The government reported a GDP growth forecast for FY 2024-25 to be 6.6%, down from 7.2%. Economists anticipate an uplift in economic performance aided by reduced interest rates and tax cuts announced in the recent Union Budget.

The central bank has indicated a cautious approach, reducing its growth forecast due to inherent uncertainties, particularly related to trade policies and global economic conditions. Notably, government infrastructure spending has escalated to Rs 2.7 lakh crore during the last fiscal quarter, significantly utilizing 61.7% of its budgeted capital outlay. Meanwhile, rural consumption has seen improvement attributed to favorable agricultural conditions following good rainfall.

Looking ahead, growth projections for FY26 suggest a rebound influenced by decreased capital costs and taxpayer relief contributing to demand. Analysts expect an increase in rural spending and suggest that while private investment may take longer to materialize due to external pressures, government spending will remain vital for sustained economic growth. The overall sentiment among economists is cautiously optimistic as they foresee gradual improvements in GDP through effective fiscal measures.

In conclusion, India’s GDP growth for Q3 FY25 signifies a positive trend driven by rural consumption and government investment. However, challenges persist in meeting aspirational growth targets set by the government. The reliance on public spending and external economic conditions remains critical as growth forecasts stabilize around 6.6%. To achieve long-term goals, continued investment in infrastructure and supportive policies are essential.

Original Source: m.economictimes.com

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