India’s economy is expected to grow by 6.5 per cent in the Financial Year (FY) 2025 despite global challenges. Growth picked up from 5.6 per cent in the second quarter to 6.2 per cent in the third quarter, driven by strong performance in agriculture and services, along with rising consumption and exports, said a finance ministry report.
Despite global uncertainties, economic activity in India gained momentum in the third quarter of FY 2025. “Private consumption, agricultural growth, and government capital expenditure have contributed to this resilience,” said the ministry’s monthly economy review for February 2025, released on Wednesday.
The outlook for the fourth quarter is looking up. “The growth in fourth quarter of the Financial Year 2025 is likely driven by improved export growth, pick-up in government capital expenditure post-elections and impetus to economic activity associated with Kumbh Mela.”
Other high-frequency indicators of economic activity which suggest improved growth momentum in Q4 include e-way bills with double-digit growth and PMI indices remaining in the expansionary zone. “The services sector performance remains robust,” the report noted.
The International Monetary Fund (IMF) recently highlighted India’s prudent economic policies and reforms, positioning it as the fastest-growing major economy.
The review also stated that the Inflationary pressures have also eased, and record food grain production is expected to keep prices stable. Retail inflation eased to 3.6 per cent in February 2025, aided by “lower food prices due to seasonal corrections and government measures.”
Agricultural production is expected to see a boost, with kharif and rabi grain output rising by 6.8 per cent and 2.8 per cent, respectively, the report added.
The Union budget 2025-26 had outlined a plan to reduce government debt by 5.1 percentage points over six years. “Fiscal targets are on track, reflecting a balance between economic growth and financial stability.”
Referring to the massive declines in the Indian equity markets, the finance ministry review attributed it to profit-taking by foreign investors after strong past performances. However, inflows into debt markets and steady investments from Indian retail investors have helped stabilise the situation. “The Indian rupee remains one of the least volatile global currencies despite market turbulence,” the report added while addressing the concerns over depreciating rupee value.
The ministry report assured that though the global trade uncertainties continue to impact exports, India’s robust services trade surplus helps offset weaker merchandise exports. “While gross Foreign Direct Investment (FDI) inflows have risen, net Foreign Direct Investment has declined due to increased outbound investments.”
The report cautioned: “We should be careful not to import the pervasive cynicism and pessimism from abroad” as faith in Indian institutions continued to be strong.
