India’s Ministry of Finance reported that private consumption reached 61.4% of nominal GDP in India’s FY25. This figure marks the highest in the last twenty years, rising from 60.2% in FY24. Economic Times’ June 28 report linked this increase to strong domestic demand in both urban and rural regions. The steady growth in private consumption reflects a shift toward internal drivers in the structure of India’s GDP. This trend has played a key role in supporting the broader economy. Especially during a period of mixed global recovery and internal policy adjustments.
Ministry Highlights Rural Rebound as Major Factor in Consumption Rise
Private final consumption expenditure rose by 7.2% in FY25, compared to a 5.6% growth rate in FY24. Senior officials attributed the recovery largely to rural demand rebound. Consumer spending and family confidence drove sectors such as retail, services, and agriculture as family spending increased. Even with persistent global and domestic threats, private consumption remained a strong and stable component of the overall trend growth. The Ministry stressed that this trend in consumer behavior helped sustain economic momentum during the fiscal year.
India’s FY25 Economy Supported by Steady but Slowing Investment
Investment activity also played a part in economic performance, though it showed signs of slowing. Gross Fixed Capital Formation increased by 7.1% in FY25, below 8.8% growth in FY24. Its contribution towards nominal GDP was 29.9%, lower than in recent years but higher than the pre-pandemic Era. The average of 28.6% for FY16 to FY20 had been recorded then. The Ministry noted that while investment growth had moderated, it continued to support the economy. However, consumption’s larger share made it the more visible driver of India’s GDP in FY25.
Exports Show Resilience with Import Decline Improving Trade Balance
India’s export sector also created economic activity. Constant 2011–12 price exports rose by 6.3% in FY25. This was a recovery from the 2.2% rise in FY24. The Finance Ministry declared that this growth occurred amid weak global trade sentiments. As such it showed showed resilience in sectors such as manufacturing and technology. The report stated that this resilient export performance added to India’s economic growth further. It also increased the year’s overall output growth.
Concurrently, imports contracted 3.7% in FY25 against the 13.8% growth of FY24. This contraction was beneficial for India’s trade balance and GDP. The Finance Ministry noted that falling imports relieved external pressure. This corrected the balance in the country’s favor of domestic production. The change also lessened exposure to foreign exchange price movements and brought in stable foreign currency needs. Thus, the combined trade performance of higher exports and lower imports strengthened India’s overall economic standing throughout the year.
India’s Diverse Growth Drivers Lay Foundation for Sustainable Economic Development
The Finance Ministry concluded that India’s FY25 growth reflected contributions from consumption, investment, and external trade. The report emphasized that India’s private consumption remained the strongest source of growth. While investment and exports also supported GDP, the balance across sectors helped avoid dependence on any single area. This broader base of growth created a more stable platform for economic development. This also supports future policy decisions aimed at maintaining economic momentum in a changing global environment.
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