India's economy accelerated to a four-quarter high of 7.4 percent growth in the final three months of fiscal year 2025, surpassing the Reserve Bank of India's forecast of 7.2 percent, according to data released by the National Statistics Office in May.
The robust quarterly performance provided a bright finish to a year that otherwise marked India's slowest economic expansion since the pandemic, with full-year growth settling at 6.5 percent—down sharply from 8.2 percent in the previous fiscal year.
The January-March surge was led by a construction boom that expanded 10.8 percent during the quarter, supported by sustained infrastructure activity and real estate demand12. Government spending, particularly in public administration and defense, grew 8.7 percent, while financial and professional services rose 7.8 percent2.
The quarterly acceleration also benefited from a 12.7 percent jump in net indirect taxes, which the State Bank of India noted as a key contributor to the overall economic expansion3. Manufacturing, however, remained subdued at 4.8 percent growth, continuing a pattern of weakness that has persisted through the year24.
Despite the strong finish, the 6.5 percent annual growth represents a four-year low, highlighting the challenges facing Asia's third-largest economy12. The deceleration from the previous year's 8.2 percent pace reflects both global uncertainties and domestic consumption pressures31.
Private consumption, while improving to 7.2 percent for the full year from 5.6 percent previously, remained uneven across regions41. Rural demand showed signs of recovery driven by strong agricultural output, but urban spending patterns suggest continued caution among consumers56.
The RBI has maintained its growth projection of 6.5 percent for the current fiscal year 2026, describing the outlook as "evenly balanced" amid global headwinds12. However, rating agency ICRA has taken a more cautious stance, forecasting 6.2 percent growth while noting that "downside risks have risen"3.
Recent high-frequency indicators for May point to continued resilience in industrial and services sectors, according to the RBI's June bulletin45. The central bank has emphasized that India remains positioned to be the fastest-growing major economy despite trade uncertainties and geopolitical tensions2.
"India's economic trajectory remains resilient despite global headwinds and regional geopolitical tensions," said Manoranjan Sharma, chief economist at Infomerics Valuations and Ratings, though he cautioned that external uncertainties continue to pose challenges6.
