Private Consumption Picks Up on Easing Inflation and Better Rural Wage Growth
Cooling Prices, Rising Wages Fuel Private Consumption Surge in Q4 FY25

Falling food prices and rising rural wages have boosted consumption in Q4 FY25, even as government spending slows in line with fiscal consolidation efforts.(Image:DC)
Chennai: Easing inflation and improved real rural wage growth has led to a pick-up in private consumption, while focus on fiscal consolidation has slackened government consumption.
Private consumption is expected to have grown at 7.5 per cent in Q4 FY25 against 6.9 per cent in the year ago quarter. Easing inflation along with steady and sustained real rural wage growth had lifted the consumption demand growth to the highest level since 1QFY25.
The retail inflation stood at 3.7 per cent in Q4, dipping below the 4 per cent target for the first time after a gap of 21 quarters.
Ind-Ra expects the retail inflation to have declined to 3.2 per cent in April 2025 which would be the lowest since July 2019 due to sustained easing of food inflation.
Prices of key food items such as tomato decreased 34.2 per cent, onion 5.7 per cent, potato 11.3 per cent, pulses 5.2 per cent, and rice 4 per cent in April 2025. Ind-Ra expects wholesale inflation to have declined to 1.4 per cent in April 2025 from 2 per cent in March 2025.
Meanwhile, rural demand continued to recover as indicated by various FMCG companies in their quarterly results for Q4. The rural real wage growth remained positive for the third straight quarter. It averaged 3.7 per cent in January-February, which was the fastest pace of growth since Q2 FY20.
However, the government consumption expenditure is expected to have slowed down to 5 per cent in Q4 FY25 from a five-quarter high of 8.3 per cent in Q3 FY25. As the government consumption had grown by 6.6 per cent in Q4 FY24, the high base led to the slower growth in the last quarter. Further, the government moving ahead towards fiscal consolidation targets also saw the expenditure coming down.
Investment demand inched up to 6.5 per cent in Q4 FY25 against 6 per cent in the year-ago quarter and 5.7 per cent in the previous quarter.
( Source : Asian Age )
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