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% in Q4FY25, a marginal dip from 6.2% growth recorded in Q4FY24.
Meanwhile, government consumption also registered a contraction, declining by 1.8% in Q4FY25 compared to a strong 6.6% rise in the same quarter last year.
The report said, “Private consumption spending in Q4 (real) moderated marginally to 5.9R in Q4FY25 from 6.2% 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.
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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% of GDP for FY25. As per report, the government now aims to bring the ratio further down to 4.4% 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.
What Else?
Direct tax collections grew by 12.9%, significantly lower than 34.1% seen in April 2024. Indirect tax growth remained range-bound at 4.3%, compared to 6.3% last year. It said “At the start of FY26, Apr’25 data shows that elevated base is impacting growth rate for direct tax collections”
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.
