Economic Growth Bounces Back in the December Quarter

NEW DELHI: The Indian economy has shown signs of a significant rebound in the October-December quarter (Q3) of the current financial year. This recovery is primarily attributed to a revival in government spending and improvements in several key economic indicators.

Economists are estimating the growth in Q3 to be in the range of 6.2-6.4%, a notable increase from the seven-quarter low of 5.4% observed in the July-September quarter. The previous quarter's growth was slower than the 6.7% in the April-June period and significantly below the 8.1% recorded in July-September of 2023-24.

The sharp slowdown was due to various factors, including reduced government spending during the election period and sluggish consumption caused by persistent price pressures.

Factors Contributing to the Economic Recovery

Aditi Nayar, chief economist at Icra, highlighted several factors that contributed to India's economic performance in Q3 FY2025. These include a significant increase in aggregate government spending on capital and revenue expenditure, high growth in services exports, a turnaround in merchandise exports, and healthy output of major kharif crops. These elements have helped buffer rural sentiment and have led to a pick-up in some consumer-focused sectors during the festive season.

Despite a slight dip in urban consumer sentiment, other sectors such as mining and electricity have seen improvements after facing weather-related challenges in the previous quarter.