India’s economy may have recorded its slowest annual growth in four years at 6.5% in FY25, but a sharper-than-expected 7.4% surge in the March quarter suggests the engine is still running strong. Chief Economic Advisor V Anantha Nageswaran attributed the resilience to robust domestic demand and a spike in private consumption, now at its highest share of GDP since FY04.
“The economic momentum, which picked up in the March quarter, also continued in April,” Nageswaran said, reinforcing optimism about a stable, low-inflation growth path. With easing interest rates on the horizon, the groundwork, he added, is being laid for a steady-growth-low inflation scenario.
“We retain our growth outlook between 6.3-6.8% for FY26, ” Nageswaran said, adding that private consumption holding up well.
The CEA highlighted a series of signals supporting the upbeat outlook: capital goods imports are steady, infrastructure goods output is rising, and the urban unemployment rate is on the decline. “Urban employment rate coming down,” he noted, underlining labor market improvements.
Against a backdrop of global uncertainty and projections of slowing international growth in 2025 and 2026, India has seen relatively smaller forecast downgrades. “While some countries are facing stagflation risks, India is witnessing a benign growth-inflation environment,” Nageswaran said.
The government’s income tax relief measures in Budget 2025 are also expected to fuel consumer spending, especially in cities. “Income tax relief will have a positive impact on consumption this fiscal, especially in urban India,” he added.
Speaking on the jump in Covid cases, the CEA said he doesn’t expect rising Covid-19 cases to lead to any problem (economically).
While India’s GDP growth accelerated to 7.4% in the last quarter of 2024-25, the overall fiscal year number of 6.5% was a 4-year low. In 2023-24, India’s GDP grew by an impressive 9.2 per cent, continuing to be the fastest-growing major economy. According to official data, the economy grew 8.7 per cent and 7.2 percent, respectively, in 2021-22 and 2022-23.
