This upward revision was primarily a reflection of stronger-than-expected growth in the third quarter, and “strong momentum” in the fourth quarter, the IMF said. File
| Photo Credit: Reuters

Speaking virtually at an event organised by the Indian Chamber of Commerce, Chief Economic Adviser (CEA) V. Anantha Nageswaran on Saturday (August 30, 2025) said the high growth momentum exhibited in the first quarter of the current fiscal is expected to continue in the coming quarter as well, with a downward bias emanating from high U.S. tariffs.

The Indian economy reported a stronger-than-expected 7.8% growth in April-June, its fastest pace in five quarters.

“I think the first quarter numbers for the fiscal year were definitely better than expected. A lot of people attributed the fact that the GDP deflator was much weaker this year compared to last year… in some sense, the GDP deflator being on the weaker side was a good thing and was not an unknown aspect. That was factored into the consensus expectations of Indian economists in the private sector,” he said.

“Yet the GDP growth number for the first quarter in the current fiscal year was much better than expected…it attests the underlying resilience of the Indian economy in general and the lagged effects of various initiatives that the government has been undertaking since its beginning in 2014 and more so in the last two Budgets continued its momentum in the second fiscal quarter as well,” Mr. Nageswaran told PTI.

Further elaborating, he said, the trade impasse with the United States is continuing for the moment, so there will be some impact in the second quarter, as increased tariffs on Indian shipments took effect in August.

A steep U.S. tariff of 50% on goods from India took effect on August 27. The tariffs – among the highest in the world – include a 25% penalty for buying crude oil from Russia. On August 7, the Trump administration enforced a 25% tariff on Indian goods, citing India’s persistent oil imports from Russia and long-standing trade barriers.

“There were two parts of the U.S. tariffs. Both will have an impact in the second quarter and possibly a little bit into the beginning of the calendar fourth quarter or the fiscal third quarter,” he said.

But, he said, “I think some of these tariff measures will be short-lived and there are a lot of conversations going on between India and the U.S. government. And I do believe that a resolution will be found sooner rather than later.

He confidently said that the tariff impact on growth activities will be contained to the second quarter, and maybe at most a part of the third quarter.

“Besides,” he said, “they will also be compensated for by the GST tax relief that is coming up and the impact of the very good monsoon we have had, and agricultural production should start doing better than what we saw in the fiscal first quarter.

The agriculture sector recorded a 3.7% growth, up from 1.5% in the April-June period of 2024-25, as per the data released by the National Statistics Office (NSO) on Friday (August 29, 2025).

The Economic Survey tabled in parliament in January had projected real economic growth of 6.3-6.8% for FY26.

The gross domestic product (GDP) growth of 7.8% in the first quarter of the ongoing fiscal year was mainly driven by a good showing by the farm sector, and also helped by services like trade, hotel, financial and real estate.

The previous highest pace of growth in the country’s GDP was recorded at 8.4% during January-March 2024, as per the data.

India remains the fastest-growing major economy, as China’s GDP growth in the April-June period was 5.2%.

On U.S. tariffs

Chief Economic Advisor (CEA) Anantha Mr. Nageswaran said that the Centre, along with various stakeholders, was actively working overtime to cushion the export sector from the tariffs imposed by the United States.

The imposition of an additional 25% tariff by the U.S. has raised the overall duty to 50%.

He said crises, whether minor or major, often act as catalysts, providing focus and purpose for all segments of society – including the government, private sector, and households – to undertake necessary actions that might otherwise have been delayed.

Since the tariffs took effect on August 27, “conversations have been happening in the last three to four days” involving exporting bodies, private sector promotion agencies, and the ministries concerned, he said.

The Ministry of Finance and other ministries are “working overtime” to formulate a strategy, aimed at providing both a “time cushion” and a “financial cushion” for the affected sectors so they can “weather the present storm and also emerge stronger”.

On the trade front, Mr. Nageswaran said a proposed agreement with the U.S., negotiated “in good faith” and close to conclusion, had been delayed due to “unexpected developments”, though not denied. He also referred to India facing a penal tariff for purchasing Russian crude oil, which the Ministry of External Affairs has described as unreasonable. He expressed hope that tariffs would be “short-lived” and that “an understanding of the importance of the larger dimensions of the India-U.S. relationship will eventually prevail”.

The CEA highlighted several “silver linings” that point to a robust and improving economic environment.

“India’s real GDP grew by 7.8% year-on-year in the first quarter of the current financial year, supported by the ‘GDP deflator’,” he said. Nominal GDP growth came in at 8.8%, exceeding private sector economists’ fears of 8-8.2%, he added.

Mr. Nageswaran attributed the lower nominal GDP growth compared to previous quarters to “good deflation” – a decline in input costs such as crude oil, industrial metals, and raw materials – while enterprises’ pricing power remained intact.

The manufacturing sector’s Gross Value Added (GVA) rose by 10.1% in nominal terms and 7.7% in real terms, reflecting its strength and providing hope that full-year nominal GDP growth will stay near the 10.1% assumed in the Union Budget.

Mr. Nageswaran said a “huge tax cut” announced in February for middle and upper-middle-income households means a family of two earners with annual income up to ₹26.7 lakh will pay no direct income tax, already visible in higher advance tax payments, he said.

Further relief is expected through rationalisation of GST rates, reduction in the number of slabs, and simplification of processes, he said.

He highlighted the employment-linked incentive scheme announced in the July 2024 budget, which rewards both employers and employees. For employees, it offers a one-time reward for taking up full-time jobs and assistance with relocation expenses, while employers receive cash incentives to continue hiring.

He said the scheme is crucial for striking the right balance between job creation and competitiveness in the age of AI.

The CEA noted India’s credit rating upgrade by Standard & Poor’s, the first in 30 years, and expressed confidence that other agencies such as Fitch may follow.

He underlined that fiscal prudence – cutting the fiscal deficit from 9.2% in 2021 to an estimated 4.4% this year – has reduced the 10-year bond yield risk premium from 500-600 basis points in 2014 to about 230-240 points now, even reaching a low of 180 points recently after it hardened a bit recently.

This has lowered borrowing costs for the government and contributed to a three-percentage point reduction in the cost of capital for the private sector over the last decade, he said.

Mr. Nageswaran said India is actively pursuing trade diversification through free trade agreements with countries such as the UAE and the U.K., and ongoing discussions with Oman and Bahrain, some of which could materialise before the year-end.

Calling the current situation an opportunity, Mr. Nageswaran urged the private sector to diversify export destinations, be responsive to changing consumer preferences, invest in product innovation and R&D, and improve business practices to enhance competitiveness.

“Each one of us has an obligation to ourselves, society, our employees and our customers to use this opportunity to improve the way we do business and strive for innovation and excellence,” he said.

He added that the government, on its part, is committed to doubling down on deregulation, improving ease of doing business, supporting job creation, and engaging with the U.S. to resolve the tariff issue.

Representational image only. Photo: wikimedia.org

Investment Information and Credit Rating Agency (ICRA) on Tuesday (February 18, 2025) projected India’s GDP to grow 6.4% in the December quarter on account of enhanced government spending amid uneven consumption.

The Indian economy grew at 6.7% in April-June, but it slowed to a seven-quarter low of 5.4% in September quarter on sluggish government capital expenditure due to general elections and weak consumption demand.

ICRA Chief Economist Aditi Nayar said India’s economic performance in Q3 FY2025 benefitted from a sharp ramp-up in aggregate government spending (Centre and state) on capital and revenue expenditure, high growth in services exports, a turnaround in merchandise exports, healthy output of major kharif crops etc, which would have buffered rural sentiment.

Some consumer-focussed sectors saw a pick-up during the festive season, even as urban consumer sentiment dipped slightly, and other sectors such as mining and electricity saw an improvement after weather-related challenges in the previous quarter.

“Overall, while we expect the pace of GDP and the GVA expansion to rise in Q3 FY2025 relative to the seven-quarter low prints for the previous quarter, marking an upturn, the performance may remain inferior to the NSO’s initial estimates for Q1 FY2025,” Ms. Nayar said.

The National Statistical Office (NSO) will release the October- December growth estimates on February 28. It will also release the second advance estimates of GDP for the current fiscal.

In the first advance estimates released in January, NSO projected GDP growth at a 4-year low pace of 6.4% in the current fiscal. The RBI expects growth to be 6.6%.

“ICRA has projected the economy to grow at 6.4% in Q3 from 5.4% in Q2, benefitting from enhanced government spending amid uneven consumption,” it said in a statement.

“India’s investment activity improved in Q3, as reflected in the uptick in the year on year (YoY) growth in several investment-related indicators vis-a-vis Q2,” the rating agency said.

This includes capital and infrastructure goods’ output, cement production, engineering goods’ exports, and capital spending of the Centre and state governments.

The YoY expansion in the government’s capex surged to a six-quarter high of 47.7% in Q3 from 10.3% in the previous quarter.

On the economy, the report said during the first half of 2024-25, real GDP growth (y-o-y) moderated to 6 per cent from 8.2 per cent and 8.1 per cent growth recorded during H1 and H2 of 2023-24, respectively. File. Representational image
| Photo Credit: Reuters

The Indian economy is exhibiting resilience and stability, and the gross domestic product (GDP) is projected to grow at 6.6 per cent in 2024-25, aided by a revival in rural consumption, a pickup in government consumption and investment, and strong services exports, a RBI report said on Monday (December 30, 2024).

The Reserve Bank has released the December 2024 issue of the Financial Stability Report (FSR), which reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on the resilience of the Indian financial system and risks to financial stability.

“The soundness of scheduled commercial banks (SCBs) has been bolstered by strong profitability, declining non-performing assets and adequate capital and liquidity buffers. Return on assets (RoA) and return on equity (RoE) are at decadal highs, while the gross non-performing asset (GNPA) ratio has fallen to a multi-year low,” the report said.

It also said that macro stress tests demonstrate that most SCBs have adequate capital buffers relative to the regulatory minimum threshold even under adverse stress scenarios. Stress tests also validate the resilience of mutual funds and clearing corporations.

On the economy, FSR said during the first half of 2024-25, real GDP growth (y-o-y) moderated to 6 per cent from 8.2 per cent and 8.1 per cent growth recorded during H1 and H2 of 2023-24, respectively.

“Despite this recent deceleration, structural growth drivers remain intact. Real GDP growth is expected to recover in Q3 and Q4 of 2024-25 supported by pick up in domestic drivers, mainly public consumption and investment, strong service exports and easy financial conditions,” the RBI said.

On inflation, the report said that going forward, the disinflationary effect of a bumper kharif harvest and the rabi crop prospects are expected to soften prices of foodgrains.

On the flipside, the rising frequency of extreme weather events continues to pose risks for food inflation dynamics.

Persisting geopolitical conflicts and geo-economic fragmentation can also impose upside pressures on global supply chain and commodity prices.

Representational image only. File
| Photo Credit: Reuters

“India’s real Gross Domestic Product (GDP) growth slumped to a multi-quarter low of 5.4% in the July to September 2024 quarter (Q2 of 2024-25), from a five-quarter nadir of 6.7% in Q1, with Gross Value Added (GVA) growth slowing to 5.8% from 6.8% in Q1,” as per the National Statistical Office (NSO).

Real GDP growth stood at 8.1% in the second quarter of 2023-24, while GVA growth was 7.7% in that quarter.

Reserve Bank of India (RBI) officials, had in its October bulletin, estimated GDP growth of 6.8% in Q2 citing economic activity indicators, while the Central bank’s official estimate, as enunciated in its latest monetary policy review, was 7%.

Barring Agriculture and Services sectors, all segments of the economy reported a sharp deceleration from a year ago, with Mining and Quarrying GVA slipping into the red with a contraction of 0.1%, from an 11.1% uptick in Q2 last year.

Agriculture, livestock, forestry and fishing GVA grew 3.5%, more than double the 1.7% uptick recorded a year ago.

Manufacturing growth also hit a bump to drop to a mere 2.2% from 14.3% in Q2 of last year, while construction GVA rose 7.7%, about half the 13.6% uptick a year earlier.

Electricity, gas, water supply and other utility services’ GVA rose 3.3%, compared to 10.5% in July-September of 2023.

Public Administration, Defence and other services led the acceleration among services, with GVA rising 9.2% from 7.7% last year. GVA for trade, hotels, transport, communication and services related to broadcasting improved 6.6% from 4.5% a year earlier, while it was 6.7% higher for financial, real estate and professional services, marginally better than the 6.2% rise in Q2 of 2023-24.

“Despite sluggish growth observed in manufacturing (2.2%), mining and quarrying (-0.1%) sectors in Q2 of FY 2024-25, real GVA in H1 (April-September) has recorded a growth rate of 6.2%,” the NSO noted.

On the bright side, the NSO highlighted a rebound in consumption spending, pointing to a 6% growth in Private Final Consumption Expenditure (PFCE) in Q2 this year over the growth rate of 2.6% a year ago. However, this marks a slowdown from the first quarter of this year, when PFCE had risen 7.4%, the fastest in six quarters.

Growth in gross fixed capital formation, an indicator of capital investments in the economy, slipped to 5.4% from 7.5% in Q1, reflecting the slowest pace in at least six quarters.

While the RBI has projected a full-year GDP growth of 7.2% and the Finance Ministry expects growth in the 6.5% to 7% range, this may require a sharp rebound in the second half of the year with real GDP rising 6% between April and September as per the NSO data. This is the slowest six-month growth print since the second half of 2022-23 when GDP rose 5.3%, and markedly lower than the 8.2% rise recorded in the first half of 2023-24.

 In India, the World Bank said, economic activity surprised on the upside in 2023Q4, with growth of 8.4% from a year ago. File.
| Photo Credit: AP

The Indian economy is projected to grow at 7.5% in 2024, the World Bank has said, revising its earlier projections for the same period by 1.2%.

Overall, growth in South Asia is expected to be strong at 6.0% in 2024, driven mainly by robust growth in India and recoveries in Pakistan and Sri Lanka, the World Bank said in its latest South Asia Development Update on April 2.

Also read | South Asia, India risk squandering demographic dividend: World Bank

According to the report, South Asia is expected to remain the fastest-growing region in the world for the next two years, with growth projected to be 6.1% in 2025.

“In India, which accounts for the bulk of the region’s economy, output growth is expected to reach 7.5% in FY23/24 before returning to 6.6% over the medium term, with activity in services and industry expected to remain robust,” the bank said in its report. In Bangladesh, output is expected to rise by 5.7% in FY24/25, with high inflation and restrictions on trade and foreign exchange constraining economic activity.

Following the contraction in FY22/23, Pakistan’s economy is expected to grow by 2.3% in FY24/25 as business confidence improves. In Sri Lanka, output growth is expected to strengthen to 2.5% in 2025, with modest recoveries in reserves, remittances, and tourism.

“South Asia’s growth prospects remain bright in the short run, but fragile fiscal positions and increasing climate shocks are dark clouds on the horizon,” said Martin Raiser, World Bank Vice President for South Asia. “To make growth more resilient, countries need to adopt policies to boost private investment and strengthen employment growth,” he said.

“South Asia is failing right now to fully capitalize on its demographic dividend. This is a missed opportunity,” said Franziska Ohnsorge, World Bank Chief Economist for South Asia.

If the region employed as large a share of the working-age population as other emerging markets and developing economies, its output could be 16% higher, Ohnsorge said.

In India, the World Bank said, economic activity surprised on the upside in 2023Q4, with growth of 8.4% from a year ago. “The expansion was supported by rapid increases in investment and government consumption. More recent survey data point to continued strong performance,” it said.

In February, India’s composite purchasing managers index (PMI) stood at 60.6, well above the global average of 52.1 (a value above 50 indicates expansion). Growth in FY2023/24 is estimated to have exceeded earlier forecasts, it said.

According to the report, in India, inflation has remained within the Reserve Bank of India’s 2–6% target range since a spike in mid-2023, and the policy rate has remained unchanged since February 2023. Food price inflation has been elevated, partly reflecting a weak harvest due to El Niño, it said.

Financial conditions in India have remained accommodative. Domestic credit issuance to the commercial sector (including public and private borrowers) grew by 14% (year-on-year) in December 2023, the fastest pace since 2013. Financial soundness indicators continued to improve. The nonperforming-loan ratio fell to 3.2% last year, well below its recent peak, in March 2018, of about 11%.

Regulatory capital totalled 17% of bank assets in the second quarter of 2023, surpassing both regulatory requirements and peer averages. FDI as a share of GDP fell in 2023, but a rebound in foreign portfolio investment inflows in FY2023/24 contributed to foreign reserves rising 8% in the year to January 2024, reaching a level sufficient to cover about 11 months of imports, the World Bank report said.

“In India, output growth is projected to reach 7.5 percent in FY2023/24 on the back of robust growth in Q3 of FY2023/24. Growth is expected to moderate to 6.6 percent in FY2024/25 before picking up in subsequent years as a decade of robust public investment yields growth dividends,” the bank said.

The expected slowdown in growth between FY2023/24 and FY2024/25 mainly reflects a deceleration in investment from its elevated pace in the previous year, it said. “Growth in services and industry is expected to remain robust, the latter aided by strong construction and real estate activity. Inflationary pressures are expected to subside, creating more policy space for easing financial conditions,” it said.

“Over the medium term, the fiscal deficit and government debt are projected to decline, supported by robust output growth and consolidation efforts by the central government,” the report said.

“Indian GDP data are not seasonally adjusted, and they are also revised multiple times before they are finalised three years after the close of the relevant financial year,” the Finance Ministry said. File
| Photo Credit: PTI

The Finance Ministry on September 15 scotched aspersions cast by “certain sections” on the credibility of Indian GDP data, which showed a 7.8% uptick in the first quarter of this year, stressing that Indian GDP data is not seasonally adjusted and is finalised three years later so “it is wrong to look at the underlying economic activity based on GDP indicators alone”.

“Ideally, critics would have done well to look at several other growth indicators to see if other data match their conclusions. Purchasing Managers’ Indices indicate that the manufacturing and services sectors are growing. Bank credit growth is in double digits. Consumption is improving, and the government has vigorously ramped up capital expenditure,” the Ministry said in a long post on social media platform X, formerly known as Twitter.

“Higher frequency data must be relied upon to form a view of the strength of the economic activity,” the Ministry said, adding that “if anything, India’s growth numbers might understate the reality because manufacturing growth indicated by the Index of Industrial Production (IIP) is far lower than what manufacturing companies are reporting”.

“Indian GDP data are not seasonally adjusted, and they are also revised multiple times before they are finalised three years after the close of the relevant financial year… Many international agencies have revised up their growth forecast for FY24 (financial year 2023-24) after the first quarter data for FY24 was released. They would not have done so if the underlying economic activity was weak,” the Ministry asserted.

The Ministry also called out references to nominal GDP growth being lower than real GDP growth as “a new bogey being spread to discredit the GDP numbers and indicate that underlying economic activity is quite weak” and said both do not stand up to scrutiny.

“India’s GDP deflator is dominated by the Wholesale Price Index (WPI) [which] peaked in the first quarter of 2022-23 due to the oil and food price increases in the wake of the war in Ukraine and supply-side disruptions. Prices began to come down from August 2022 onwards. Hence, WPI is now contracting year on year. It will soon pass once the statistical base effect disappears,” the Ministry statement noted.

“If inflation were higher, critics would argue that nominal GDP growth is much higher because of inflation and that there was little underlying activity. MoSPI calculates quarterly GVA in real terms first, and then, using the deflator, nominal values are obtained. No wonder nominal growth rates have slowed, with WPI contracting in recent months. This will normalise in the coming months,” the statement pointed out.

Editorial |An uneven rebound: On the economy

“India’s real GDP growth was 7.8% year on year in the first quarter of 2023-24. This is as per the Income or Production Approach. As per the expenditure approach, it would have been lower. So, a balancing figure – statistical discrepancy – is added to the expenditure approach estimate. These discrepancies are both positive and negative. Over time, they wash out,” the Ministry pointed out.

“In fact, in FY23 and FY22, the ‘statistical discrepancy’ was negative. In other words, growth as per the Income Approach was lower. Using the expenditure approach, it would have been higher than the 7.2% reported for FY23 and higher than the 9.1% reported for FY22,” it emphasised.

“India consistently uses the Income Side approach for calculating GDP growth for various reasons. It does not switch between the two approaches depending on which one is favourable,” the Ministry underlined.

“So, arguing that nominal GDP growth is more reliable because India has issues with its calculation of GDP deflator is to invent an argument where none exists. This is just to justify the liking for nominal GDP growth because it has been moderating in recent quarters after the high growth in the first fiscal quarter of FY23. In other words, critics want to latch on to anything that does not paint the Indian economy in a good light,” the Ministry concluded.

India observed its 77th Independence Day this year. This analysis measures India’s relative performance in the past 76 years compared to other countries across four parameters — GDP per capita, Human Development Index (HDI), Infant Mortality Rate (IMR) and women’s participation in Parliament. Owing to technological advancement and infrastructural development, India and other countries have made remarkable progress in the past seven and half decades. So it becomes imperative to look at where India stood compared to other nations around the time of independence and where it stands now among them.

India is compared with these countries: BRICS (Brazil, Russia, China, South Africa), G-7 countries (Canada, France, Germany, Italy, the United Kingdom, and the United States), emerging economies (Argentina, Chile, Colombia, Egypt, Hungary, Indonesia, Iran, Malaysia, Mexico, the Philippines, Poland, Saudi Arabia, Thailand, Turkey, and the United Arab Emirates) and the Indian subcontinent (Bangladesh, Bhutan, Nepal, Pakistan and Sri Lanka).

Chart 1 | The chart compares GDP per capita (in $) of 26 countries between the 1960s and 2022.

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India’s GDP per capita ranking of 24 out of 26 nations analysed remained unchanged between the 1960s and 2022. While Indonesia and Nepal were lagging behind India in the 1960s, Pakistan and Nepal were lagging behind in 2022.

Chart 2 | The chart compares the Human Development Index of 31 countries between 1950 and 2021.

India’s HDI increased by 0.11 points in 1950 to 0.633 in 2021. However, India’s ranking slipped from 26 in 1950 to 29 by 2021. Of the five countries which lagged behind India in 1950, Saudi Arabia, Indonesia and Bangladesh—moved ahead by 2021, with scores of 0.87, 0.7 and 0.66 respectively.

Chart 3 | The chart compares infant mortality rates in 32 countries between 1960-1975 and 2021. 

Between 1960 and 1975, India had the seventh-worst IMR among these 32 nations. In 2021, India regressed four spots and became the third-worst. Of the six countries which were behind India in 1960-75, five (Turkey, Bangladesh, Bhutan, Egypt and Nepal) surpassed India by 2021. However, South Africa regressed.

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Chart 4 | The chart compares the share of women in Parliament in 31 countries between 1997 and 2022. 

Women’s participation in India increased from 7% in 1997-98 to 14.9% in 2022. Over 10 countries were behind India in this indicator in 1997-98. In 2022, only five remain below India.

In case of other indicators like access to electricity and usage of the internet, India has had significant progress. Between 1993 and 2000, only 50% of India’s population had access to electricity. By 2020, this increased to 99% of its population. A majority of the 32 countries considered provided electricity to over 99% of their population by 2020, except for Pakistan, South Africa and Nepal where the share remains below 90%. In 1990, almost no country considered, except for the U.S., had any access to the Internet. But by 2020, India has managed to provide internet access to 43% of its population. While India lags behind 27 countries in this indicator, Bhutan (53.5%) is the only country in the subcontinent that is ranked above India.

In 1960, with a population of 45.05 crore people, India had the second-highest population behind China (66.7 crore). By the end of 2022, India’s population stood at 1.417 billion, surpassing China’s 1.412 billion, making India the most populous country in the world, according to the World Population Review.

Source: World Bank and Our World in Data

vignesh.r@thehindu.co.in and rebecca.varghese@thehindu.co.in

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