Private consumption at 2-decade high, economic momentum continues: CEA

Chief Economic Adviser (CEA) V Anantha Nageswaran today said the domestic demand is "fairly robust" and private consumption is at a two-decade high. He said the momentum the economy picked up in the last quarter of 2024-25 is continuing in the current financial year.

The CEA said that conditions are in place for a low inflation and steady growth environment supported by monetary policy. “We have a fairly robust domestic demand. Private consumption share of the GDP has risen to the highest level since all the way going back to 2004. So, it is the highest in two decades. Gross fixed capital formation is nearly 30% of GDP at current prices. Overall, we can see that private consumption is holding up very well, and capital formation is very steady,” Nageswaran said, while addressing a press conference after the government released GDP growth estimates of 7.4% for Q4, FY25 and 6.5% for FY25.

India's real gross domestic product (GDP) accelerated to 7.4% in the fourth quarter (Q4) of the financial year 2024-25 (January-March), according to the data released by the National Statistics Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI) on Friday. The FY25 real GDP growth rate has been estimated at 6.5%, while the nominal GDP growth rate is estimated at 9.8%.

“The real GDP growth picked up after the first two quarters. In terms of growth drivers, agriculture has seen a slight dip in Q4. Industry has picked up quite significantly after the first two quarters of slowdown. Monetary policy may have also played a part in boosting liquidity conditions. The service sector has maintained the overall growth rate in the fourth quarter,” said Nageswaran.

On the perception that India’s growth rate has slowed down in the course of the four years of Covid-19, Nageswaran said it is important to understand that globally, there is growth-scarce environment. “IMF's global growth numbers are being revised lower in calendar 2025 and 2026. In the growth-scarce environment post-COVID and in the context of the rising uncertainties due to geopolitical conflicts and trade tensions, India is holding on to its growth numbers better than the advanced economies,” Nageswaran said.

That is something that we need to internalise, he said. “We are now two months into the new financial year. Both manufacturing and services are in the expansionary zone. The momentum the economy picked up in Q4 is continuing in Q1, FY26. This is a good sign,” said Nageswaran.