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Key Points

India's economy showed strong performance with a 7.4% GDP increase in Q4 FY25, largely attributed to a significant rise in net indirect taxes. The State Bank of India (SBI) has projected continuous growth, estimating a GDP growth rate of 6.3% to 6.5% in FY26. The report highlighted robust growth across sectors, led by public administration and financial services, amid increased household savings. Despite potential global challenges, SBI remains optimistic about India's stable and high-growth trajectory in the upcoming year.

Key Points: India's Q4 FY25 Growth Surpass Expectations Led by Tax Boost

  • India's GDP rose 7.4% in Q4 FY25 aided by tax collections
  • SBI forecasts 6.3-6.5% growth for FY26
  • Public administration and financial services led Q4 sector growth
  • Household savings rise, expected to boost investments without inflation.
3 min read

Strong economic growth in Q4 of FY25 due to rise in net indirect taxes, GDP to grow at 6.3 to 6.5% in FY26: SBI Report

India's GDP surged by 7.4% in Q4 FY25, buoyed by a tax rise; SBI forecasts 6.5% growth in FY26.

"Q4 throws a pleasant surprise at 7.4 per cent buoyed by growth in net indirect taxes. - SBI Report"

New Delhi, May 31

India's economy recorded strong growth in the fourth quarter of FY25, mainly due to a sharp rise in net indirect taxes, stated a report by the State Bank of India.

The report stated that India's GDP grew by 7.4 per cent in Q4 FY25. This growth came as a pleasant surprise and was higher than expected, supported by a 12.7 per cent increase in net indirect taxes.

The jump in tax collections significantly contributed to the overall expansion in economic activity during the quarter.

It said, "Q4 throws a pleasant surprise at 7.4 per cent buoyed by growth in net indirect taxes."

SBI has also projected a positive outlook for the Indian economy in the current financial year. It expects the country to remain the fastest-growing major economy in FY26, with GDP growth estimated to be in the range of 6.3 per cent to 6.5 per cent.

It added, "We believe that the Indian economy is poised to remain the fastest-growing major economy in FY26 (GDP growth expected at 6.3-6.5 per cent)."

According to the report, the growth momentum is likely to be supported by strong macroeconomic fundamentals, a robust and healthy financial sector, and sustained focus on long-term development goals. These factors are expected to help India maintain stability even in the face of global uncertainties.

In January this year, the gross GST revenue stood at Rs 1.96 lakh crore, marking a 12.3 per cent increase compared to the same month last year. February collections reached Rs 1.84 lakh crore, up 9.1 per cent year-on-year. In March, GST collections again touched Rs 1.96 lakh crore, registering a 9.9 per cent annual rise, according to data released by the government.

Almost all sectors exhibited better growth numbers in Q4 FY25. The services sector takes the lead with growth at 7.3 per cent in Q4.

Among services (in Q4), 'Public administration, defence and Other Services' grew by 8.7 per cent and 'Financial, Real Estate & Professional Services' grew by 7.8 per cent. On a yearly basis services sector grew by 7.2 per cent in FY25 as against 9.0 per cent in FY24.

The report also pointed to a rise in household savings, as reflected in the latest RBI annual report. Higher savings are expected to aid domestic investments and provide the necessary financing for growth without adding inflationary pressures.

Therefore, SBI does not foresee any major demand-driven price hikes in FY26.

SBI concluded that despite potential external and geopolitical risks, India is well-placed to continue on a stable and high-growth path in the coming year.

- ANI

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Reader Comments

R
Rahul K.
Great news for our economy! But I hope this growth translates to more jobs and better salaries for middle-class families like mine. The services sector doing well is promising. Jai Hind! 🇮🇳
P
Priya M.
While the numbers look impressive, I'm concerned about how much is coming from indirect taxes. GST collections are up but common people are feeling the pinch. Growth should be more broad-based.
A
Amit S.
The financial sector growth at 7.8% is fantastic! As a small business owner, I've seen easier loan approvals this year. If this continues, India can truly become a $5 trillion economy soon.
S
Sunita R.
Good to see household savings increasing. This means people have more financial security. But government should ensure inflation remains controlled so these savings don't lose value. Fingers crossed for FY26!
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Vikram J.
The report mentions geopolitical risks - very important point. With China slowing down and global uncertainties, India needs to strengthen domestic demand. Make in India initiative must get more focus now.
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Neha P.
As an economics student, I find the tax-led growth interesting but slightly worrying. What happens when tax collections normalize? We need stronger manufacturing growth to sustain this momentum long-term.

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