India’s GDP growth reached 7.4% in the first quarter of 2025, significantly surpassing the forecast of 6.6%. The country’s growth prospects remain relatively robust, primarily driven by strong domestic consumption and relatively low dependence on exports.
The IMF predicts that India’s economy will reach $4.187 trillion in 2025, slightly exceeding Japan to become the world’s fourth-largest economy. Amid global economic slowdown and trade uncertainties, India has achieved counter-trend growth—with a 7.4% year-on-year GDP increase in Q1, far exceeding economists’ expectations. Data released by the Indian Statistics Bureau on the 30th shows that India’s economic growth rate for the fourth quarter of the 2025 fiscal year (i.e., Q1 2025) reached 7.4%, greatly exceeding the economists’ forecast of 6.6%. The previous value was 6.2%. For the entire 2025 fiscal year, India’s economic growth was 6.5%, consistent with the government’s February estimate. India’s growth outlook remains relatively stable, largely due to robust domestic consumption and low reliance on exports, which effectively buffers the impact of unpredictable trade policies from the Trump administration. India’s Q1 GDP surged by 7.4%, prompting expectations of further central bank rate cuts. Government data indicates that India currently has a trade surplus of nearly $46 billion with the United States. Some observers believe India could be the next country to reach an agreement with the U.S. According to a Global Times report earlier this month, India proposed a “zero-for-zero” tariff arrangement for specific goods—including steel, auto parts, and pharmaceuticals—in trade negotiations with the U.S. However, the proposal requires reciprocity and is limited to a certain quantity of imports. Last month, the Reserve Bank of India cut rates for the second consecutive time to 6% and shifted its policy stance to accommodative to stimulate growth. Market expectations now suggest another rate cut in June. Shilan Shah, Deputy Chief Emerging Markets Economist at Capital Economics, predicts that India’s policy rate will drop to 5.5% in the current easing cycle. He stated, “Declining inflation and downside risks to growth will prompt another repo rate cut next week.” However, the growth outlook is not without challenges. Earlier this month, tensions between India and Pakistan escalated, leading to military actions between the nuclear-armed neighbors. Shah noted that the ceasefire in Kashmir is “fragile, and tensions could easily escalate again,” potentially dampening investment and consumption.Consumption is driving growth, and India may become the world’s fourth-largest economy. Despite this, India’s growth story is expected to continue, partly due to improved consumer demand in rural areas. Consumption accounts for more than half of India’s economy, with rural areas contributing nearly 40% of total consumer goods sales in the first quarter of 2025, according to data from NielsenIQ.
The International Monetary Fund predicts that India’s economy will reach $4.187 trillion in 2025, slightly surpassing Japan’s $4.186 trillion, making it the world’s fourth-largest economy. Shah stated, “Given India’s favorable demographics and room for sustained productivity improvements, it is inevitable that India will surpass Japan and even Germany. By 2040, it is not unimaginable for India’s economy to reach the combined size of Germany and Japan.” Following the data release, the yield on India’s 10-year government bonds rose by 2 basis points to 6.27%. Risk Warning and Disclaimer: The market carries risks, and investment requires caution. This article does not constitute personal investment advice and does not consider the specific investment objectives, financial situation, or needs of individual users. Users should evaluate whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investments made based on this are at the investor’s own risk.
