India’s GDP Growth Shows Promise, But Fiscal Concerns Persist

• India's GDP growth is expected to rise to 6.2% in Q3 FY25, up from 5.4% in Q2 FY25, despite concerns over GDP and fiscal data discrepancies.
• The gap between GDP and GVA growth likely stabilized in Q3FY25, though challenges remain.
• Full-year GDP growth is forecast at 6.4%, but achieving this requires a 6.8% expansion in H2FY25, amid risks from declining tax growth.

India’s economic expansion is set to accelerate in the third quarter of FY25, with GDP expected to climb to 6.2% from 5.4% in Q2FY25, according to Union Bank of India.

While this suggests positive momentum, key concerns remain about discrepancies between GDP calculations and fiscal data.

The report suggests that the negative gap between GDP and Gross Value Added (GVA) growth, which weighed down the first half of FY25, has likely stabilized in Q3FY25.

“We estimate Q3FY25 GDP growth rate to improve to 6.2% (5.4% in Q2FY25), as the negative gap between GDP and GVA growth observed in H1-FY25 probably became neutral in Q3FY25,” the report stated.

A major red flag is the decline in indirect tax growth, which could mean that the GDP-GVA gap might persist. If this downward trend in tax revenue continues, the projected GDP growth could be overly optimistic.

Despite keeping its full-year GDP growth projection at 6.4%, achieving this would demand a sharp 6.8% expansion in H2FY25—an ambitious goal given recent economic volatility.