India’s economy is expected to continue its recovery during the second half of 2024-25 and into 2025-26, according to the Reserve Bank of India’s (RBI) latest bulletin.
The country is projected to remain the fastest-growing economy globally, as highlighted by forecasts from the International Monetary Fund (IMF) and the World Bank, which estimate growth rates of 6.5 percent and 6.7 percent, respectively.
The RBI’s report underscores fiscal policy in the Union Budget for 2025-26, which strikes a balance between fiscal consolidation and economic growth. The government’s focus is on capital expenditure and increasing household income as part of its key strategies. The capital expenditure to GDP ratio is expected to rise to 4.3 percent in 2025-26, up from 4.1 percent in the previous period.
Retail inflation has dropped to a five-month low of 4.3 percent in January, primarily due to falling vegetable prices. Other economic indicators also point to a recovery in the second half of 2024-25 after a previous slowdown.
Industrial activity is on the rise, as seen in higher PMI (Purchasing Managers Index) readings for January, along with increased tractor sales and fuel consumption. Rural demand remains strong, driven by rising farmer incomes, which is reflected in a 9.9 percent growth in FMCG (Fast-Moving Consumer Goods) sales in Q3 2024-25. This is up from 5.7 percent growth in the previous quarter.
Urban demand also picked up, with growth of 5 percent in the third quarter, nearly double the 2.6 percent growth recorded in the prior quarter. The RBI’s survey confirms the acceleration in sales growth for non-government and non-financial companies in Q3, with operational profit margins increasing alongside sales growth.
Private sector investment intentions remain stable, with approved project costs from banks and financial institutions approaching ₹1 lakh crore in Q3 2024-25. However, global trade uncertainties and geopolitical tensions have impacted domestic stock markets, with both primary and secondary markets witnessing declines due to foreign investor sell-offs. The Indian rupee has depreciated, following the trend of other emerging market currencies, amid a stronger US dollar.
Despite these challenges, India’s strong macroeconomic fundamentals continue to help the country navigate global uncertainties. The RBI highlighted the rising policy uncertainty regarding US trade policies, a situation that was last seen during the US-China trade in 2019. The report also points out that the fragmentation of global trade and protectionist policies could lead to long-term changes in global trade patterns.
Globally, economic growth remains stable but moderate, with varying prospects in different countries. Financial market uncertainty has risen, fueled by slower disinflation and the impact of tariff policies. Emerging markets, including India, are facing pressure from foreign investors selling off assets, as well as currency depreciation due to the strength of the US dollar.
Despite these external challenges, India remains optimistic about maintaining its position as one of the world’s fastest-growing economies. With improving economic indicators, the country continues to focus on sustainable growth, leveraging its strong economic foundation and policy initiatives.
The government’s emphasis on strategic fiscal policies, coupled with steady growth in key sectors such as agriculture, manufacturing, and services, positions India for continued success in the years to come.
Despite facing global uncertainties and external challenges, India’s resilient economic fundamentals and strategic fiscal policies provide a strong foundation for continued growth. With positive indicators across various sectors, India is well-positioned to sustain its status as one of the world’s fastest-growing economies, driving forward progress and prosperity for the nation.
India's Economic Outlook 2025: Experts Debate GDP Growth Trajectory | India Today
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