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Q4 GDP springs surprise as tax spike fuels India’s best quarter in FY25: SBI

India’s economy delivered stronger-than-expected growth in the fourth quarter of FY25, largely due to a sharp rise in net indirect tax collections, according to a report by the State Bank of India.

The report said that GDP grew by 7.4% in Q4 FY25, surprising observers with a performance driven by a 12.7% increase in net indirect taxes. This spike in tax revenue played a significant role in boosting overall economic activity during the quarter.

“Q4 throws a pleasant surprise at 7.4 per cent buoyed by growth in net indirect taxes,” the report stated.

SBI projected a positive outlook for the current financial year as well. It expects India to retain its position as the fastest-growing major economy in FY26, with GDP growth estimated between 6.3% and 6.5%.

“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),” it said.

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The report highlighted that India’s growth momentum is likely to be sustained by strong macroeconomic fundamentals, a robust and healthy financial sector, and continued focus on long-term development goals. These elements are expected to help maintain stability even amid global uncertainty.GST revenue figures were cited as evidence of this momentum. In January 2025, gross GST collections reached ₹1.96 lakh crore, showing a 12.3% increase compared to the same month the previous year. In February, collections rose to ₹1.84 lakh crore, up 9.1% year-on-year. In March, GST collections again hit ₹1.96 lakh crore, registering a 9.9% annual increase, based on official data.Almost every sector reported improved performance in the fourth quarter. The services sector led the way with 7.3% growth in Q4. Within services, ‘Public administration, defence and Other Services’ grew by 8.7%, while ‘Financial, Real Estate & Professional Services’ rose by 7.8%. On a full-year basis, the services sector grew by 7.2% in FY25, compared to 9.0% in FY24.

The SBI report also pointed to a rise in household savings, as seen in the latest annual report by the Reserve Bank of India. These higher savings are expected to support domestic investment and provide capital for growth without triggering inflation.

As a result, SBI said it does not anticipate any major demand-driven price increases in FY26.

The report concluded that despite the risk of external and geopolitical challenges, India appears well-positioned to maintain a stable and high-growth trajectory in the coming year.

Content Source: economictimes.indiatimes.com

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