India's Q4 FY25 Data : A Reflection Beyond the Headline Numbers

In the past few weeks, India has made headlines not just for growing — but for growing meaningfully. 

• A remarkable 7.4% GDP growth in Q4 FY25

• The historic leap past Japan to become the world’s 4th largest economy in 2025

• Robust GST revenues (₹2.01 lakh crore in May 2025)

• Declining inflation (3.16% in April 2025)

The question is no longer whether India will grow — it is how that growth will be shaped, shared, and sustained. Its pertinent to look at the recently released GDP data (by NSO) for deeper understanding

Confused between Real and Nominal GDP?

Nominal GDP : The total value of goods and services produced in a country measured using current market prices (includes inflation).
Real GDP : The total value of goods and services produced in a country adjusted for inflation; it reflects the actual increase in output.

Real GDP = Nominal GDP ÷ GDP deflator to adjust inflation
 

• Economic Resilience Amid Global Headwinds

  • Despite global uncertainties like kinetic conflicts in Ukraine & Gaza, Trump’s tariff conundrum, supply chain shocks etc, India’s economy posted robust growth.
  • With growth surpassing most major economies, India consolidates its position as a bright spot in the global economic landscape.

• Agricultural Recovery

  • The primary sector grew by 5%, up from a sluggish 0.8% earlier — reflecting better rabi output, increased MSP procurement, and government support.
  • Positive for rural demand, farmer income, and food security.

• Public Investment as a Growth Driver

  • High growth in construction (10.8%) and public administration (8.7%) suggests that government capital expenditure is yielding results.
    • Reflects successful execution of schemes like PM Gati Shakti, NIP, and PM Awas Yojana.
  • Strong public capex, stable macro fundamentals, and infrastructure readiness can crowd in private investment in the coming quarters.

• Healthy Financial Services Sector

  • The discrepancy between GDP (7.4%) and GVA (6.8%) implies that indirect taxes and subsidies have grown — suggesting better tax buoyancy and formalization.
  • Indicates improved GST compliance, digital transactions, and tax net expansion. This in turn will reduces reliance on borrowing & improve fiscal deficit management.
  • Higher tax collection leads to better fiscal space for social spending and capex.

• Structural Shift Toward Services

  • Growth in services indicates a maturing economy, reflecting rising urbanisation, digitisation, and knowledge economy development.
  • Rich prospects of service led exports, expansion of services to semi-urban and rural areas

• Discrepancy Between GDP and GVA

  • GDP (7.4%) outpacing GVA (6.8%) suggests growth is driven by taxes, not underlying production.
  • Raises concerns about real output strength and sustainable demand

Do not know about GVA and GDP?

GVA (Gross Value Added) : It is the value of goods and services produced in an economy minus the cost of inputs and raw materials. It tells us how much value a sector or producer adds.

GDP (Gross Domestic Product) : It is the total monetary value of all final goods and services produced in a country in a specific period. GDP includes taxes and excludes subsidies on products.

GDP = GVA + (Taxes on products − Subsidies on products)

• Uneven Sectoral Growth

  • Over-reliance on construction and government services may indicate a lack of broad-based industrial recovery.
    • Few sectors like manufacturing and mining remain volatile or subdued.
    • Limits export competitiveness and Make in India objectives.
  • High growth in GDP hasn't translated into proportionate employment generation, especially in formal jobs.
  • Growth concentrated in certain states and sectors; regional disparities are growing.
  • Construction-led growth can strain urban infrastructure and ecological sustainability (e.g., pollution, heat stress).

• Private Investment Still Weak

  • Despite public capex-led growth, private sector investment hasn’t picked up significantly.
  • Points to low business confidence and concerns about consumption sustainability.

• Consumption-Led, Not Investment-Led Growth

  • Much of the recovery is still driven by urban consumption and government spending. Persistent rural demand weakness may hurt inclusive recovery.
  • Private consumption may be uneven across income groups, with the bottom 50% still under stress.
  • Core inflation remains sticky; tax-driven growth may mask price-level stress, especially on fuel, food, and services. This can erode real incomes and household purchasing power.

• Structural Bottlenecks Persist

  • Labour market rigidities, land acquisition issues, and skill mismatches continue to constrain productivity growth.
  • Supply-side reforms remain incomplete - like land reforms which create bottleneck in project implementation

• Support Agri-Infrastructure and Rural Demand

  Agriculture’s recovery is positive — build on it with :

  • Post-harvest infrastructure through Agriculture Infrastructure fund, hand holding primacy agricultural cooperative societies (PACS) for local storage
  • Irrigation reforms like solar pumps, micro irrigation techniques
  • Climate-resilient agriculture through R&D ecosystem, HYV climate resilient seeds, nano fertilizers
  • Technologies like drones, hydroponics etc

• Target Employment-Intensive Growth

  Recognize the limits of construction-led job absorption; aim for better quality, formal jobs :

  • Incentivise labour-intensive sectors like textiles, food processing, MSMEs for expansion, technologies adoption and manpower skilling.
  • Make in India and Make for the world by imbibing blockchain (to track origin and movement of goods) for quality assurance.
  • Mainstream vocational education as aspired in National Education Policy 2020
  • Continue strong allocations under PM Gati Shakti, NIP, and urban infrastructure missions.

• Focus on Services-Led Innovation

  • Uplift the potential of Anusandhan National Research Foundation through hand holding innovation up to commercialization.
  • Deep tech startups in sectors like space, drone, AI should be supported with long term capital.
  • Capitalise the untouched - expand services to the untouched demography of rural India. 

• Make Growth Broad-Based and Inclusive

  • Bridge developmental gaps between Rural - Urban area, Manufacturing - Service industries, Producer State - Consumption State by hand holding the focused aspiration region / sectors.
    • Expand aspiration blocks to concerned rural areas, manufacturing sectors for the same.
  • Sustainability and climate consciousness : Promote green jobs, circular economy models, green infrastructure and industries, and carbon budgeting aligned with India's climate commitments under policies like Lifestyle for Environment (LiFE).

• Reform GDP Measurement for Credibility and Clarity

  • Adopt green GDP and well-being accounting frameworks to capture quality of growth, not just quantity.
  • Institutionalise regular review of NSO methodology and move toward holistic economic indicators (employment, informal sector, environmental costs).
  • Address the GDP vs. GVA gap that raises doubts about the true strength of real economic activity.

• Accelerate Second-Generation (Quantum) Reforms

  • Move beyond incrementalism: undertake long-pending structural reforms in:
    • Land markets like land pooling, digitisation, conclusive land titling
    • Labour codes like balancing flexibility with security
    • Judicial reforms like decriminalization of offences, technology for case management etc
    • Power sector restructuring like reviving DISCOMs, green energy pricing
    • GST simplification like slab rationalisation, bringing crude and real estate under GST
  • Disruptive technologies for smart governance need to be mainstreamed for real time economic mapping
    • Export quality and speed can be eased with blockchain and AI based systems
  • Policymakers must improve land/labour reforms, resolve regulatory bottlenecks, ensure predictable tax policy and ensure policy stability to crowd in private investment

India’s Q4 FY25 GDP growth of 7.4% offers a promising yet complex narrative. As Prime Minister Narendra Modi aptly said,

“Our economy is moving forward with resilience and vigour, but the journey ahead demands reforms that are inclusive, sustainable, and technology-driven.”

From a theoretical perspective, this aligns with the insights of development economist Amartya Sen, who emphasized that “Development is freedom” — not just in economic output but in expanding the real freedoms people enjoy, including employment, health, education, and environmental quality.

Thus, by addressing structural reforms, measuring progress beyond GDP, and embedding sustainability can India truly embark on the path of “development as freedom” and realize the vision of “Sabka Saath, Sabka Vikas, Sabka Vishwas.”