India’s Economic Growth 2025: Key Facts, Projections & Challenges

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1. Growth Trajectory

• FY 2024–25: India’s economy grew 6.5%, retaining its position as the fastest-growing major economy.
• Q4 FY 2024–25 (Jan–Mar 2025): Growth accelerated to 7.4%, driven by surges in services, industry, and agriculture.

2. Outlook for FY 2025–26

• Government projections estimate growth between 6.3%–6.8%.
• The Reserve Bank of India maintains its forecast at 6.5%.
• Moody’s expects growth to exceed 6.5%, citing capital expenditure, tax relief, and supportive monetary policy.
• OECD projects 6.3% in 2025 and 6.4% in 2026, placing India at the top among G20 economies.
• The UN forecasts 6.3% in 2025, supported by consumption and investment.
• IMF estimates remain steady at 6.5% for FY25 and FY26, and 6.8% for calendar year 2025.

3. Recent Policy Boosts

• A major GST tax overhaul rolled out in August 2025 is expected to boost GDP by 0.6 percentage points, enhancing consumption and market sentiment.
• The stock market responded strongly: Nifty crossed 25,000, Sensex surged over 1,000 points, and auto & consumer equities rallied.
• S&P upgraded India's sovereign rating to "BBB", citing economic resilience and fiscal prudence—likely to attract more investment.

4. Structural & Sectoral Insights

• FY 2024–25 Sectoral Highlights:
  • Manufacturing grew by approximately 12.3% in FY 2023–24.
  • Construction rose 10.8%, agriculture held steady at ~5.4%, and services gained ~7.3% in Q4.
• Key Growth Drivers: Domestic consumption, infrastructure investment, and global supply chain shifts are fueling manufacturing and services.

5. Risks & Growth Scenarios

• U.S. tariffs could impact export-led growth, especially in textiles and gems, potentially trimming GDP by ~60 basis points.
• Geopolitical tensions and trade shocks may slow momentum despite strong domestic demand.
• Risks from monsoon variability and global commodity prices persist, though public investment and consumption may offset them.
• Inclusive growth challenges remain, including gender-based employment gaps and the need for sustained policy support.
• To achieve an 8% growth target, India must raise investment rates to ~40% by 2035 and improve labor participation, especially among women.

Summary Table