Private consumption hits 20-year high, now 61.4% of India's GDP
What's the story
India's private consumption has reached a two-decade high, according to the latest monthly report by the Ministry of Finance. The report shows that the share of private consumption in nominal GDP rose from 60.2% in FY24 to 61.4% in FY25. This is the second-highest level seen over the last 20 years and indicates strong demand for goods and services across India.
Expenditure growth
Surge in rural demand drives private final consumption expenditure
The Ministry's report also noted a faster growth rate of 7.2% for private final consumption expenditure in FY25, compared to 5.6% in FY24. This surge can largely be attributed to a revival in rural demand. The increase highlights the resilience and recovery of consumer spending patterns across different sectors of the economy.
Investment trends
Gross fixed capital formation up 7.1%
In terms of investments, the gross fixed capital formation (GFCF) grew by 7.1% in FY25, a slight decline from the 8.8% growth recorded in FY24. In nominal terms, GFCF contributed to 29.9% of GDP, lower than the last two years but still above pre-pandemic levels of an average of 28.6% during FY16 to FY20.
Trade performance
Exports grow by 6.3%
Finance Ministry's report also highlighted an improvement in India's external trade, with exports (at constant 2011-12 prices) growing by 6.3% in FY25, a huge jump from just 2.2% in FY24. This growth comes despite global trade uncertainties and shows the resilience of India's export sector amid challenging international market conditions.
Economic balance
Imports fell by 3.7%
In contrast to the robust growth of 13.8% in the previous year, imports fell by 3.7% in FY25. The decline further bolstered overall net exports, positively impacting economic growth. The Ministry's report emphasizes a balanced contribution from consumption, investment, and exports as key drivers of India's economic expansion during this period.