India's Private Consumption Hits 20-Year High at 61.4% of GDP in FY25

India's private consumption has reached a 20-year high, accounting for 61.4% of the country's GDP in the fiscal year 2025. This marks a significant increase from 60.2% in the previous fiscal year, driven by a strong rebound in rural demand and steady household spending. The growth in private consumption, which rose by 7.2% in FY25 compared to 5.6% in FY24, has been a key driver of India's economic growth. This trend reflects a shift towards internal drivers in the structure of India’s GDP, supporting the broader economy during a period of mixed global recovery and internal policy adjustments.

The Ministry of Finance highlighted that the recovery in rural demand has been a major factor in the rise of private consumption. Consumer spending and family confidence have driven sectors such as retail, services, and agriculture, contributing to the overall economic momentum. Despite persistent global and domestic threats, private consumption has remained a strong and stable component of the overall trend growth. This trend in consumer behavior has helped sustain economic momentum during the fiscal year, making it a crucial factor in India's economic performance.

While investment activity also played a part in economic performance, it showed signs of slowing. Gross Fixed Capital Formation increased by 7.1% in FY25, below the 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 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.

India’s export sector also contributed to economic activity. Constant 2011–12 price exports rose by 6.3% in FY25, recovering from the 2.2% rise in FY24. This growth occurred amid weak global trade sentiments, showing resilience in sectors such as manufacturing and technology. The resilient export performance added to India’s economic growth and increased the year’s overall output growth. Concurrently, imports contracted by 3.7% in FY25 against the 13.8% growth of FY24. This contraction was beneficial for India’s trade balance and GDP, relieving external pressure and correcting the balance in 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.

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, supporting future policy decisions aimed at maintaining economic momentum in a changing global environment.