NewKerala.com

Key Points

India's private consumption growth slowed slightly to 5.9% in Q4 FY25 according to Bank of Baroda's latest report. While the government met its fiscal deficit target of 4.8% of GDP, tax collections showed slower growth at the start of FY26 due to high base effects. The report highlights mixed consumption trends with urban demand holding up better than rural sectors which remain monsoon-dependent. With capital expenditure normalizing and revenue spending increasing, the economic outlook remains cautiously optimistic.

Key Points: India's Private Consumption Slows in Q4 FY25 as Fiscal Deficit Met

  • Private consumption growth dips to 5.9% in Q4 FY25
  • Fiscal deficit meets 4.8% target but tax collections slow
  • Rural demand hinges on monsoon and kharif output
  • Urban demand shows resilience in select sectors
3 min read

Private consumption in India slows in Q4 FY25; fiscal deficit met, but revenue collections see soft start to FY26: BoB Report

BoB report shows private consumption growth dips to 5.9% in Q4 FY25 while fiscal deficit hits 4.8% target but tax collections slow in FY26

"Private consumption spending in Q4 moderated marginally to 5.9% in Q4FY25 from 6.2% in Q4FY24 - Bank of Baroda Report"

New Delhi, June 12

Private consumption in the Indian economy moderated slightly in the fourth quarter of FY25, according to a recent report by Bank of Baroda.

The report added that the real private consumption spending grew by 5.9 per cent in Q4FY25, a marginal dip from 6.2 per cent growth recorded in Q4FY24.

Meanwhile, government consumption also registered a contraction, declining by 1.8 per cent in Q4FY25 compared to a strong 6.6 per cent rise in the same quarter last year.

The report said "Private consumption spending in Q4 (real) moderated marginally to 5.9 per cent in Q4FY25 from 6.2 per cent in Q4FY24; while government consumption registered contraction"

As of May 2025, the report highlighted that the consumption demand in the country presents a mixed picture, based on high-frequency indicators.

It stated that while non-oil-non-gold and electronic imports have shown improvement, indicating positive momentum in select segments, key indicators such as auto sales, steel consumption, and power demand have witnessed a slower pace of growth.

On the agriculture front, the report highlighted that the government has announced higher Minimum Support Prices (MSP) for kharif crops. The focus is now shifting towards the progress of the monsoon season, which will play a critical role in rural consumption and overall economic momentum.

On the fiscal side, the Centre successfully met its fiscal deficit target of 4.8 per cent of GDP for FY25. As per report, the government now aims to bring the ratio further down to 4.4 per cent in FY26.

However, overall government spending fell short of the revised estimate (RE) in FY25. Total revenue expenditure stood at Rs 36 lakh crore, slightly lower than the RE of Rs 37 lakh crore.

As FY26 began, the report highlighted that the data for April 2025 shows that the elevated base from last year is impacting tax collection growth.

Direct tax collections grew by 12.9 per cent, significantly lower than 34.1 per cent seen in April 2024. Indirect tax growth remained range-bound at 4.3 per cent, compared to 6.3 per cent last year.

It said "At the start of FY26, Apr'25 data shows that elevated base is impacting growth rate for direct tax collections"

The report noted that within overall spending, capital expenditure growth is now normalising, while revenue expenditure has begun to pick up.

The near-term outlook suggests that consumption trends will remain mixed, with urban demand indicators like electronics and imports showing resilience, but rural demand may remain dependent on monsoon performance and kharif output.

- ANI

Share this article:

Reader Comments

R
Rajesh K.
The slight dip in consumption growth is concerning but expected given global headwinds. What gives me hope is the fiscal discipline shown by meeting deficit targets. We need to focus on boosting rural demand now - MSP hikes are good but monsoon will be the real game changer. 🇮🇳
P
Priya M.
As someone working in consumer electronics, I can confirm the mixed trends. While premium products are selling well, mass market demand has softened. Government should consider tax cuts on essentials to boost middle class spending power. The GST council should take note!
A
Amit S.
The contraction in government consumption is worrying. While fiscal prudence is good, we can't compromise on infrastructure spending. Hope the new FY sees better capex allocations - our roads and railways need continuous investment for long-term growth.
S
Sunita R.
Rural India needs more attention! MSP hikes are welcome but farmers need better market access and storage facilities. The monsoon forecast looks decent, but we need permanent solutions for agrarian distress. When villages prosper, the whole economy benefits. 🌾
V
Vikram J.
The tax collection slowdown is a red flag. With elections over, government should focus on widening the tax base rather than increasing rates. More compliance = more revenue without burdening honest taxpayers. Simplify GST further!
N
Neha P.
Mixed consumption trends show our economy's complexity. While urban India is buying gadgets, rural areas struggle. We need balanced growth. Maybe time to revive MNREGA with more skill-based work? Also, cheaper loans for small businesses could help boost spending. 💡

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50