India Demonstrates Steadfastness, Defying Expectations
In the second quarter of 2025, India's economy demonstrated a remarkable performance, cementing its position as the fastest-growing large economy. The nominal GDP growth for Q2 2025 was 8.8%, albeit the lowest in three quarters, while the real GDP growth stood at 7.6%, marking a five-quarter high.
The growth was driven by a variety of sectors. The manufacturing sector expanded by 7.7%, with the services sector experiencing a two-year high of 9.3%. Significant gains were also recorded in trade, transport, finance, real estate, and public administration, contributing to the services boom.
Agriculture growth in Q2 2025 was 3.7%. Despite early rainfall affecting the mining, utilities, and construction sectors, these setbacks did not significantly impact the overall GVA growth, which still stood at 7.6%.
The robust economic performance was partly due to low inflation, which was unusually benign during Q2 2025. This, coupled with recent income-tax cuts and the government's front-loading of investments, boosted consumption growth to 7%.
Looking ahead, the Indian government is planning to restructure GST tax slabs and enhance investment in infrastructure to further support consumption. However, the government must also manage potential challenges in the medium term, such as navigating global trade bloc competition and resolving trade disputes with key partners like the United States.
This strong economic growth strengthens India's prospects of becoming the world's fourth-largest economy by the end of the current financial year. The Indian economy's growth rate is 110 basis points above the Reserve Bank of India's forecast of 6.5% for the same period.
As India continues to grow, it will undoubtedly maintain its position as a significant player in the global economy, offering opportunities for both domestic and foreign investors.
