India’s gross fixed capital formation (GFCF) at constant prices, which is taken as a proxy for investment demand in the economy, rose to 7.5 percent in Q1FY25 (April-June) as compared to the previous quarter.

According to the latest gross domestic product (GDP) data, released by the National Statistical Office on August 30, growth in GFCF accelerated in Q1 from 6.46 percent in Q4 FY24.

The share of private investment in GDP rose marginally to 34.8 percent in April-March 2024-25 as compared to 34.6 percent in the corresponding quarter in the previous fiscal, at constant prices.

"The gross fixed capital formation at 34.8% of GDP for Q1 FY 2024-25 is indicating steady capacity expansion for more employment opportunities in the coming times," Sanjeev Agrawal, President, PHD Chamber of Commerce and Industry, said.

At current prices, the share of private investment in GDP saw a negligible decline at 31.3 percent in Q1 2024-25 as compared to 31.4 percent in the corresponding quarter in the previous fiscal.

"The acceleration in the GFCF growth, to 7.5 percent in Q1 FY2025 from 6.5 percent in Q4 FY2024, is at odds with most high frequency indicators related to government and private capex. We anticipate a back-end pickup in the GDP growth to above 7 percent in H2 FY2025, boosted by factors such as government capex and pent-up rural demand during the festive months," Aditi Nayar, Chief Economist at rating agency ICRA, said.

The other biggest driver of growth from the demand side was the gross fixed capital formation (GFCF). Notably, the public sector capex (union, 24 states and central public sector enterprises) was sharply down by 33.3 percent YoY to Rs 3.8 trillion in Q1FY25.

The major components apart from public sector for capex are households and the private sector. A stagnation in the public sector capex (in view of the parliamentary elections) along with a steady capex by the household sector (as visible via the housing sales data) indicates a modest pickup in the private sector capex," Paras Jasrai, Senior Economic Analyst at India Ratings and Research said.

India’s economic growth slowed to a five-quarter low of 6.7 percent in the first quarter of the fiscal year from 7.8 percent in the preceding March quarter due to election-related expenditure and a fall in the government capex, the chief economic advisor V Anantha Nageswaran said at a media briefing.