India’s Q4 GDP A ‘Pleasant Surprise’ At 7.4%, Supported By 12.7% Jump In Net Indirect Taxes: SBI Report

Stronger than expected growth of India's gross domestic product (GDP) in March quarter of financial year 2024-25 has been supported by sharp rise in net indirect taxes at 12.7%, according to State Bank of India's report.

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.

The growth has come as a pleasant surprise which was higher than expected by the economists and experts. India reported best ever quarterly growth of FY25 in March quarter with a GDP growth rate of 7.5%. Despite India's upbeat Q4GDP growth, its GDP growth rate in FY25 remained at four-year-low at 6.5%, as per the data released by Ministry of Statistics And Programme (MOSP) on Friday. Several economists have expressed optimism about India's GDP growth rate for FY26.

Sharp Uptick in India's Net Indirect Taxes

Net indirect taxes increased by 12.7% during the quarter. 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)."

India's GDP Growth Momentum Likely To Be Supported By Strong Macroeconomic Fundamentals

India's GDP growth rate in upcoming months will be supported by strong macroeconomic fundamentals, robust and healthy financial sector. Continuous focus on long-term development goals will also help the country in achieving its estimated GDP targets for upcoming quarter, underlined SBI in its report.

Record GST Collection

Sharp jump in collection of net indirect taxes can be attributed in massive uptick in collection of goods and services tax (GST). India's gross GST revenue in January stood at Rs 1.96 lakh crore, which was 12.3% higher than GST revenue collected in January 2024.

India's GST collection in February stood at 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.

No Major Demand-Driven Price Hikes in FY26

Rise in household savings are likely to aid domestic investments in FY26, which will provide required financing for growth without impacting inflation, noted SBI while eliminating the risk of any demand-drven price hikes in current financial year.

In India's GDP growth rate, services sector took the lead with a growth rate 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. As a result, India's is well-positioned to continue on a stable and high-growth path in the coming year.