India GDP: Growth at 7.4% faster than expected in fourth quarter

BBC News

a day ago

India's economy grew by 7.4% in the period between January and March - up from 6.2% the previous quarter and significantly beating analyst expectations. However, growth for full 2024-25 year, which runs between April and March, is pegged at 6.5% - the slowest in four years. The country's central bank - the Reserve Bank of India - meets later in June and is expected to cut rates for the third time in a row to boost growth.India remains the world's fastest growing major economy, although growth has sharply dropped from the 9.2% high recorded in financial year 2023-24.
Asia's third-largest economy benefitted from strong growth in farm activity, steady public spending and improved rural demand in the last financial year, even as manufacturing and new investments by private companies remained weak. While rural growth has improved on account of a strong winter harvest it is not nearly enough to offset continuing weakness in urban consumption, which has flagged due to high unemployment and lower wages.India's growth engine remains heavily dependent on the government's infrastructure spending on roads, ports and highways, in the absence of significant growth in private investment. Going forward, lower food inflation and oil prices as well as the pre-arrival of the monsoon and above average rainfall could boost crop prospects and help India's farm sector, according to economists.Domestic growth should also benefit from government's income tax cuts announced in the federal budget, as well as "monetary easing, expectations of an above normal monsoon and lower food inflation", Aditi Nayar, an economist with the ratings agency Icra, said. But ongoing global uncertainties, including US President Donald Trump's trade war, are expected to weigh on export demand.India is currently negotiating a trade-agreement with the United States which is officially expected to conclude by fall. Trump slapped tariffs of up to 27% on Indian goods in April – and a 90-day pause on these ends on 9 July.Economists expect GDP growth in the ongoing financial year 2025-26 to further slow to 6% on the back of these global slowdown worries which could delay new private capital spending on projects. The International Monetary Fund (IMF) expects global growth to drop to 2.8% in 2025 and 3% in 2026.Data from Icra earlier showed private sector expenditure, as part of overall investments in India's economy, fell to a 10-year low of 33% in the last financial year.Net foreign direct investment (FDI) into India – at $0.35bn in 2024-25 – also fell to the lowest level in two decades, as rising outward foreign investment and repatriations by Indian companies, neutralised inward investment.Prime Minister Narendra Modi's government has been attempting to position India as a manufacturing hub for global companies.While companies like Apple indicated recently that it was shifting most of its production of iPhones headed to the US from China to India, trade analysts have cautioned that such manufacturing investment could yet stall, with the US and China agreeing to roll-back tariffs earlier this month.