Indian Economy

India’s economy recorded a robust 7.4% growth in the January–March quarter of fiscal year 2024–25, significantly outperforming market forecasts and cementing its status as the fastest-growing major economy. Driven by a strong rebound in construction and manufacturing, this growth surpasses both domestic and international expectations amid global uncertainties.

GDP Growth Beats Estimates, Led by Construction and Manufacturing

According to official data released on May 30, India’s gross domestic product (GDP) increased by 7.4% year-on-year in the final quarter of FY 2024, up from a revised 6.4% in the previous quarter. This figure exceeded the 6.7% forecast in a Reuters poll and marked the fastest growth since early 2024.

India’s Chief Economic Adviser, V. Anantha Nageswaran, highlighted that the country’s performance stands out globally:
“India’s growth is holding up in a growth-scarce environment.”

Comparatively, China’s economy grew 5.4% in the same quarter.

Key Sector Performance

• Construction surged by 10.8%, up from 7.9% in the previous quarter
• Manufacturing output rose 4.8% year-on-year, compared to a revised 3.6% in Q3
• Gross Value Added (GVA) increased 6.8%, reflecting a solid foundation in core economic activity

These figures indicate recovery from a mid-year slowdown in 2023, according to economists.

Consumption Trends and Investment Outlook

Private consumption, which accounts for nearly 57% of India’s GDP, slowed to 6% growth in the March quarter, from a revised 8.1% in the previous quarter. While urban demand moderated, rural consumption showed signs of resilience, particularly in durable goods and agricultural machinery.

Meanwhile, capital expenditure grew by 9.4%, though economists noted that private investments may remain cautious due to ongoing global uncertainties, especially concerning trade policies.

Global Risks and Domestic Support

Despite impressive Q4 figures, the outlook for the current fiscal year is tempered by concerns over potential U.S. tariffs, including a proposed 26% reciprocal tax on Indian imports, currently on hold until July 9. A general global slowdown is also affecting investment and trade flows.

However, domestic factors offer positive counterbalance. Retail inflation dropped to a six-year low of 3.16% in April. A favourable monsoon forecast may help stabilize food prices. The Reserve Bank of India is expected to lower interest rates again, enhancing liquidity and consumer spending.

Fiscal and Monetary Trends

Government expenditure declined by 1.8% during January–March, following a 9.3% rise in the previous quarter. Despite this, the overall fiscal year growth estimate remains unchanged at 6.5%. As of March-end, the size of India’s economy reached ₹330.68 trillion ($3.87 trillion).

What Lies Ahead

Radhika Rao, Senior Economist at DBS Bank, projected that India’s growth will stabilize around 6.5% in the coming fiscal year:
“Farm output, lower inflation, and on-track public spending are likely to support domestic demand even as external uncertainties persist.”

The Reserve Bank’s anticipated monetary easing, alongside sustained government spending and tax incentives, is expected to bolster consumption and investment in the months ahead.

Conclusion

India’s 7.4% GDP growth in the final quarter of FY 2024–25 showcases the country’s strong economic fundamentals amid a volatile global environment. While international risks remain, domestic resilience in construction, manufacturing, and rural demand positions India to sustain its growth momentum.

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India’s economic growth witnessed a slowdown in the third quarter (October-December) of the 2024-25 fiscal year, registering a 6.2% expansion, as per the latest data released by the National Statistical Office (NSO). This marks a significant deceleration compared to the 9.5% growth recorded in the same period a year ago. The dip was primarily attributed to sluggish performance in the manufacturing and mining sectors.

A Gradual Cooling Off?

Despite a strong start earlier in the fiscal year, India’s GDP growth has moderated in recent quarters. The economy expanded at 5.6% in the July-September quarter before inching up to 6.2% in Q3. While this reflects resilience in the face of global uncertainties, the fading momentum raises questions about the trajectory for the coming quarters.

The NSO, in its second advance estimate of national accounts, has pegged the overall growth rate for 2024-25 at 6.5%, slightly improving upon its initial forecast of 6.4% made in January.

Revised Estimates Paint a Brighter Picture

In a notable revision, the NSO adjusted the GDP growth rate for 2023-24 to 9.2%, up from the earlier estimate of 8.2%. This revision indicates that the Indian economy may have been on a stronger footing than previously believed, possibly providing some cushion against the recent slowdown.

Key Factors Behind the Slowdown

• Manufacturing Woes: The sector has struggled with subdued demand and high input costs, impacting overall industrial output.
• Mining Sector Slump: Weak performance in mining has dragged down the overall GDP numbers.
• Global Headwinds: Ongoing geopolitical tensions and fluctuating commodity prices continue to exert pressure on economic growth.

Looking Ahead: Can India Maintain its Growth Momentum?

While the slowdown in Q3 raises concerns, the projected 6.5% growth for FY25 still reflects a stable economic outlook. Policymakers will likely focus on reviving industrial output, boosting domestic consumption, and attracting foreign investment to sustain growth momentum.

With key sectors showing mixed signals, all eyes will be on the upcoming policy measures and global economic trends that will shape India’s growth trajectory in the months ahead. Will India regain its pace, or is this a sign of a more prolonged slowdown? The next few quarters will be crucial in answering that question.