India has once again proved to be economically resilient with a stunning 7.4% GDP growth in the January–March 2025 quarter, surpassing market forecasts of 6.7% and marking the fastest quarterly expansion since early 2024. The growth places India as the world's fastest-growing major economy.
Key Drivers Behind the Growth
The robust growth is largely attributable to the construction and manufacturing sectors, whose activity jumped on the back of increased public infrastructure projects and climbing domestic demand. Experts also cite:
- Public capital expenditure
- An increase in net indirect taxes
- Increased government spending ahead of the fiscal year-end
View the full report from Reuters here.
Annual Growth Snapshot
India's GDP grew by 6.5% throughout the entire fiscal year, cementing its position as a rising economic giant. The International Monetary Fund (IMF) predicts that India could grow to be just as large as Japan's economy, reaching a value of \$4.2 trillion by 2026.
Learn more about India's economic forecast from the Financial Times.
Political and Economic Implications
This economic growth is a strategic win for Prime Minister Narendra Modi's government, especially in times of criticism for economic stagnation and rising living costs. The government recently launched middle-class tax cuts targeted to boost consumer spending and domestic demand.
Read how the Modi government is leveraging economic growth: FT analysis.
Issues to Watch
Despite the favorable figures, several issues loom:
- Private sector investment still lags
- Global trade uncertainties could affect future growth
- Inflation management remains crucial
Aiding all this, however, with inflation now subsiding and the Reserve Bank of India (RBI) also set to maintain accommodative monetary policies, economists predict India's GDP to increase 6.3% to 6.6% in fiscal 2026.
Last Thoughts
India's Q1 2025 economic boom is a testament to the country's ability to steer the world growth narrative. With judicious policies, shrewd investment, and robust domestic demand, India is all set to become the fourth-largest economy in the world.
Sources:
- India's economy grows 7.4% in January–March – Reuters
- India's GDP growth outpaces forecasts – Financial Times