Rural Demand and Agriculture: Strong agricultural performance due to favourable monsoon conditions has boosted rural incomes and consumption, contributing positively to overall economic activity

The Indian economy is showing signs of recovery after experiencing a slowdown in the previous quarters. The fourth quarter of fiscal year 2025 promises better performance.

India's GDP growth is projected to rebound significantly in Q3 FY2025. After a disappointing growth rate of 5.4% in the second quarter, various economists are expect growth to pick up to around 6.5% to 7% in the third quarter.

According to estimates, the economy is expected to grow by 6.4% for the fiscal year 2024-25 and 6.9% in 2025-26, supported by public consumption and investment, alongside a steady recovery in the service sector.

Public Consumption and Investment: The Indian government has ramped up capital expenditure, with spending expected to compensate for earlier slowdowns caused by general elections and reduced capital outlays. As of November 2024, public spending had reached only 37.3% of its target for FY25 but is projected to improve significantly in Q3  

Rural Demand and Agriculture: Strong agricultural performance due to favourable monsoon conditions has boosted rural incomes and consumption, contributing positively to overall economic activity.

Air Passenger Traffic and Vehicle Registrations: Air passenger traffic grew by 11.6% in Q3 compared to 7.8% in Q2, signalling a recovery in travel demand post-pandemic. Additionally, vehicle registrations surged by 32.4% year-on-year in October 2024, largely due to festive demand and a recovering automotive sector

Electricity Demand: Electricity demand has also shown improvement, driven by increased industrial activity and residential consumption during the festive season. The rise in electricity usage is a positive indicator of economic activity and consumer confidence.

Financial Sector Resilience: The financial sector remains resilient, with banks reporting high profitability levels and declining non-performing assets (NPAs). The gross NPA ratio has fallen to multi-year lows, enhancing the banking sector's capacity to support economic growth through lending.

Government capital expenditure is a key driver of growth, with increased spending supporting infrastructure projects and the capital goods sector. "Signs of a rebound in capital formation growth are emerging early in the second half of FY25. T

he order books for infrastructure and capital goods saw a sharp rise in FY24 and H1 FY25, suggesting a delayed investment push that will unfold in the upcoming quarters. The infrastructure sector is anticipated to gain momentum, with the cement, steel, and electricity industries benefiting from increased post-monsoon demand and government-driven initiatives.

As per analysts at Brickwork Ratings, the Indian economy is on a recovery trajectory as it moves into Q4, buoyed by strong domestic consumption and investment trends. Brickwork Ratings (BWR) is India’s home-grown credit rating agency.