New Delhi [India], June 16 : India's economy continues to demonstrate resilience amid global uncertainties, as country's real GDP grew by 7.4 per cent in the fourth quarter of FY25, bringing full-year growth to 6.5 per cent, surpassing expectations, according to the recent report by CareEdge Economic Pathways report.
The report also reflects that, although this marks a moderation from the 8.4 per cent average seen in the previous two years, the economy remains on a strong footing. Growth in FY26 is projected at 6.2 per cent.
The services and construction sectors drove economic momentum, with construction activity growing by 10.8 per cent in Q4. Manufacturing showed improvement, while private consumption moderated.
Additionally, urban demand remained mixed, but rural demand was steady, supported by robust wage growth. Meanwhile, household savings declined for the third consecutive year to 18.1 per cent of GDP, while financial liabilities rose to 6.2 per cent, reflecting increasing household leverage.
Furthermore, Retail inflation eased significantly, with CPI dropping to 3.2 per cent in April 2025, marking its lowest level since August 2019. Food inflation moderated sharply, helped by the arrival of Rabi harvests, comfortable reservoir levels, and projections of above-normal rainfall.
However, prices of edible oils and fruits remained elevated, restricting further upside in the overall food inflation. Inflation is expected to average 4.0 per cent in FY26, down from 4.6 per cent in FY25.
On the fiscal side, the central government maintained the FY25 deficit at 4.8 per cent of GDP. While direct tax collections were slightly lower, strong corporate tax revenues and restrained spending helped contain the shortfall. Capital expenditure exceeded expectations at ₹10.5 trillion, with a notable pickup in both central and state spending in the second half of FY25.
Investment activity improved sharply in Q4 FY25, led by private sector announcements and government project completions. Manufacturing and electricity were major beneficiaries. Non-petroleum exports remained slightly positive, while services exports stayed resilient. However, the goods trade deficit widened in April.
Recently, the Reserve Bank of India (RBI) cut the repo rate by 50 basis points to 5.5 per cent in June and announced a phased 100 basis point CRR cut, boosting liquidity.
The rupee weakened slightly due to volatile FPI flows and higher oil prices, but it remains stronger than earlier lows. However, CareEdge projects a stable FY26 with moderate inflation, steady growth, and continued investment momentum.
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