At a time when much of the world’s economic engine sputters, India’s growth engine continues to hum, driven by resilient rural consumption, buoyant government spending, and prudent policymaking. The country is poised to post a strong 6.7% GDP growth in the January–March 2025 quarter, up from 6.2% in the previous three months, according to a Reuters poll of economists. Some estimates, like JP Morgan’s, suggest the final number could be even higher at 7.5%.
The optimism is not without reason. India’s rural economy, often overlooked in mainstream macroeconomic narratives, has quietly but meaningfully rebounded. With a favourable monsoon forecast and easing inflation—April retail inflation fell to a six-year low of 3.16%—rural households have increased discretionary spending, contributing to broader economic dynamism.
At the same time, government spending remains a cornerstone of India’s investment story. With private firms showing caution amid global uncertainties, the public sector has taken the lead in driving capital expenditure, particularly in infrastructure. This has kept investment activity buoyant and sustained momentum in the broader economy.
Beyond GDP: The GVA Perspective
While GDP growth remains the headline figure, economists have advised caution, noting that gross value added (GVA) growth, which excludes taxes and subsidies, may paint a more moderate picture. JP Morgan estimates GVA growth at 6.7% for the March quarter, up from 6.2% in the previous quarter, indicating steady but not exuberant expansion in real economic activity.
This divergence underscores a broader truth: the Indian economy’s recovery, while strong, is being unevenly felt across sectors. Urban demand indicators remain mixed, and private sector investment has not fully rebounded. But the strength of the rural economy, a reinvigorated services sector, and rising net exports continue to provide ballast.
Macroeconomic Fundamentals Remain Strong
India’s macroeconomic fundamentals offer one of the few bright spots in a turbulent global landscape. According to the Reserve Bank of India (RBI), India is expected to retain its title as the fastest-growing major economy in the world, with 6.5% GDP growth projected for the 2024–25 fiscal year. The IMF projects India’s GDP could soon match Japan’s at $4.18 trillion, potentially making it the world’s third-largest economy.
The RBI attributes this resilience to multiple factors: improved consumption demand, strong performance in services, a rebound in agriculture, and disciplined macroeconomic management. Fiscal policy and monetary policy remain in sync, with the government and RBI working in coordination to support growth without stoking inflationary pressures.
The policy environment remains favourable. The government’s tax relief measures announced in February, along with the possibility of an RBI rate cut in June, could further spur both consumption and investment. Moreover, the National Manufacturing Mission, launched in the Union Budget 2025–26, is expected to boost industrial production and employment.
Global Trade Strategy and India’s Next Phase
As global trade dynamics continue to evolve, India’s engagement on the international stage is deepening. With 14 free trade agreements and six preferential trade agreements already in place—and fresh negotiations underway with the US, EU, Oman, and Peru—India is positioning itself as a central node in global commerce.
What makes India particularly attractive is not just scale but stability. In an era marked by trade fragmentation and geopolitical tension, India’s relatively lower dependence on goods exports, steady policy regime, and strong institutions offer investors and trade partners a degree of predictability that few emerging economies can match.
Kaushik Das, chief economist at Deutsche Bank India, aptly summed it up: “Despite the various downside risks, we think the policy coordination between the government and the RBI remains the strongest at this juncture.” The message is clear—India has a plan, and it’s sticking to it.
India’s Moment—But It Must Be Managed Wisely
India is not just growing; it is evolving. But with opportunity comes responsibility. Policymakers must remain alert to structural challenges, from employment generation to regulatory simplification. Execution will be key.
Still, the signs are promising. The services sector is resilient. Consumer and business sentiment is improving. And inflation remains under control.
India has reached a pivotal moment. It stands tall not just as an emerging market outperformer, but as a stabilising force in a fragmented global economy. Staying the course with discipline, clarity, and ambition could ensure this moment becomes a sustained era of growth.
