Investment in economy helped Q4FY25 GDP but need to see if trend sustains, say economists

"Investments, mainly from the public side, have outshone while private capex remains tepid, albeit expected due to the global and economic frictions leading to some hesitation in the market," Sankar Chakraborti, CEO, Acuite Ratings & Research said.

Finance Ministry data showed that in Q4FY25, Centre's capital spending jumped 33.1% on year as compared to a mere 1% growth during the first nine months (April-December) of FY25. Specifically, March saw a capex of Rs 2.4 lakh crore, which is 67.2% higher than a year ago.

For the entire financial year, central government's capex grew by 10.8% to Rs 10.5 lakh crore, which is 103.3% of the revised Budget Estimate.

However, according to former finance secretary SC Garg, the actual capex numbers - which lead to infrastructure creation on ground - are still lower than what is reported by the government. "It could be that capex figures are not reflecting actual capex numbers. In October-November, the central government capex was used to repay debt of NHAI. So, I’m not sure, if March figures do reflect actual capex on ground," Garg said.

Going forward, the growth in investment needs to be watched out for a sustainable trend, given the economic uncertainty and weak foreign investment demand, economists have said. The net FDI inflow in FY25 were mere $0.35 billion, 96% lower than $10.13 billion seen in FY24.

"We expect growth to stabilise around the mid-6% range at the start of FY26, supported by farm output, relief in purchasing power from lower inflation and monetary easing, as well as continued public spending. However, external uncertainties could have an impact through trade and investment channels," said Radhika Rao, Senior Economist at DBS Bank.