India’s Economy Expands Despite Global Uncertainty

By FAZLULLAH for RAHAMATABAD.COM

Date: March 1, 2025

India’s Economy Expands Despite Global Uncertainty

India’s Gross Domestic Product (GDP) grew by 6.2% in the October-December quarter of the 2024-25 fiscal year, showcasing resilience despite global economic challenges. The growth was largely driven by higher consumer spending, increased government expenditure, and robust agricultural output.

While the Q4 GDP growth is an improvement from the 5.6% growth in Q3, it slightly missed analysts’ expectations of 6.3%. However, it reinforces India’s position as one of the fastest-growing major economies.

Key Growth Drivers in Q4

1. Consumer Demand Rebounds

• Private consumption, which accounts for nearly 60% of India’s GDP, surged by 6.9% year-on-year.
• The festival season, coupled with rural demand recovery, contributed to strong household spending.

2. Government Spending Boosts Growth

• The government ramped up capital expenditure by 8.3%, focusing on infrastructure, defense, and welfare schemes.
• Large investments in roads, railways, and urban projects played a crucial role in economic expansion.

3. Agricultural Strength Amid Favorable Monsoons

• The agricultural sector grew by 5.6%, benefiting from a good monsoon and increased foodgrain production.
• Rural incomes improved, leading to higher demand for goods and services.

Sector-Wise GDP Performance

Challenges Hindering Growth

Despite the positive trajectory, India faces several economic challenges:

• Weak Industrial Growth: The manufacturing sector expanded by just 3.4%, impacted by global trade uncertainties and slowing exports.
• Foreign Investment Outflows: Foreign investors pulled out $4.1 billion in Q4, amid geopolitical concerns and tighter global financial conditions.
• Inflation Pressures: Retail inflation stood at 4.3% in January 2025, slightly above the RBI’s comfort level, affecting consumer sentiment.

Monetary Policy & Future Outlook

The Reserve Bank of India (RBI) recently cut interest rates, the first reduction in five years, to stimulate economic activity. The central bank’s focus remains on balancing growth and inflation control.

The Indian government has revised its full-year GDP growth forecast to 6.5%, reflecting optimism about sustained economic momentum. However, global uncertainties, trade tensions, and volatile commodity prices remain risks to future growth.

Conclusion: Steady Growth with Scope for Improvement

India’s Q4 GDP growth of 6.2% signals a steady economic recovery, driven by domestic consumption and government-led investments. While challenges remain in the manufacturing and export sectors, strong services and infrastructure expansion are expected to support future growth.

With strategic policy interventions and stable macroeconomic conditions, India is well-positioned to maintain its status as the fastest-growing major economy in the world.