The government remains confident about growth prospects and a revival in the economic growth momentum in the fourth quarter of the fiscal year 2024-25 as well as the next fiscal despite ongoing external uncertainties and expects a full revival in domestic urban demand and continuing strong rural demand. As per the second advance estimates of national income released on Friday, India’s economy is seen to grow by 6.5% in FY25, which is a tad better than the first advance estimates that pegged GDP growth at 6.4%. GDP is estimated to grow at 6.2% in the third quarter of the fiscal and the growth estimate for the second quarter of the fiscal year has been revised upwards to 5.8% from the earlier 5.4%. However, the first quarter growth was revised downwards by 20 bps to 6.5% from the earlier estimate of 6.7%. Analysts have noted that, given the current estimates, the GDP growth in the fourth quarter of the fiscal would have to be in the range of 7.6%, with many calling it a bit too optimistic. However, Chief Economic Advisor V Anantha Nageswaran highlighted that there was a broad-based growth in the third quarter of the fiscal driven by domestic demand and exports and this is likely to continue going ahead. “Despite the uncertain growth outlook, India’s economic momentum is expected to sustain driven by strong rural demand and a revival in urban consumption,” he told reporters at a press briefing after the data was released. Robust kharif production and better rabi sowing, coupled with higher reservoir levels and seasonal winter correction in vegetable prices, augur well for food inflation going forward, he further noted. The tax cuts announced in the Union Budget 2025-26 for the middle class will help contribute to aggregate demand, he noted. Further, fourth quarter GDP growth would also be aided by higher private final consumption expenditure due to travel and spending related to the Maha Kumbh where millions of Indians went. While he said that it would be difficult to quantify the impact of this, the CEA noted that it will have a “sizeable impact on consumption expenditure in the fourth quarter of the fiscal.” Private final consumption growth is estimated at 6.9% in the third quarter of the fiscal versus 5.9% in the second quarter while government final consumption expenditure was at a five-quarter high of 8.3% in the third quarter of the fiscal from 3.8% in the previous quarter. However, most analysts expect GDP growth to be lower than the implicit estimate of 7.6% in the fourth quarter of the fiscal. “..the GDP is implicitly estimated to growth by 7.6% in Q4 FY2025. This, we believe, is slightly on the higher side given the global uncertainties surrounding merchandise exports and commodity prices, which would affect corporate margins, as well as subdued prints for sectors such as electricity and coal for January 2025,” said Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA. The agency expects Q4 GDP growth to print at about 6.5-6.9%, led by government spending and rural consumption. Consequently, for the full-year FY2025, we expect the GDP growth at 6.3% as against the second advance estimate of 6.5%, she noted. Paras Jasrai, Senior Economic Analyst at India Ratings and Research said that the possibility of achieving a 7% plus growth in 4QFY25 looks challenging, especially at the current juncture which has been marred by renewed geopolitical risks that may keep investment demand by private players at bay and in wait-watch mode. “The positive news has been the moderating inflation, which is expected to decline to 4.5% in 4QFY25. This would provide boost to the real wages and thus the consumption demand,” he noted. However, Rajani Sinha, Chief Economist, CareEdge Ratings said the agency expects GDP growth of around 7% in Q4 FY25 and 6.7% for FY26. “Factors such as recovering rural demand, lower tax burden, policy rate cuts, falling food inflation, and recovery in public capital expenditure should support improvement in economic activity going ahead. Festivities amidst Maha-Kumbh celebrations in Q4 should also support consumption demand and sectors such as trade, hotel and transport,” she said, adding that a sustained recovery in consumption will be critical to drive a meaningful uptick in corporate capex. However, rising global policy uncertainty, especially on the trade front, geopolitical tensions, and weather events, remains a key monitorable, she further said. Nageswaran also highlighted that the near term global economic outlook is influenced by trade policies of major economist amid a slowing disinflation. “These policies may fuel inflation, lead to tighter financial conditions, and increase volatility,” he warned. Further challenges include developments such as the US dollar’s strength and rising Japanese interest rates that could exacerbate capital outflows from emerging markets, raise risk premiums and heighten external risks, he said.