Is India’s GDP Set to Grow by 6.5 Percent This Fiscal?
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Synopsis
India's GDP is predicted to grow by 6.5% this fiscal year, despite challenges from US tariffs. With rising consumer demand and government investment, can the economy sustain its momentum? Discover the factors influencing this forecast and the sectors most affected by potential tariff changes.
Key Takeaways
- India's GDP is projected to grow by 6.5% this fiscal year.
- Consumer demand remains strong, fueled by lower inflation and interest rates.
- Government investment spending plays a critical role in supporting economic growth.
- The manufacturing sector benefits from reduced input costs and rising demand.
- US tariffs pose significant risks to India's export sector.
New Delhi, Aug 30 (NationPress) Despite facing numerous challenges, India’s gross domestic product (GDP) is anticipated to expand by 6.5 percent this fiscal year, amidst potential risks stemming from the US tariff increases, as reported by Crisil.
In the first quarter of this fiscal, India's real GDP growth surged to 7.8 percent year-on-year, up from 7.4 percent in the previous quarter.
According to Dipti Deshpande, Principal Economist at Crisil, “The growth on the supply side saw a rebound of 7.6 percent, primarily fueled by the services sector, aided by a statistical low-base effect. The manufacturing sector benefited from reduced input costs amid rising domestic demand and increased export shipments.”
Robust consumer demand—fueled by healthy rural incomes, lower inflation, reduced interest rates, and tax relief—is expected to persist in the coming quarters, bolstering overall GDP growth, while strong government investment spending is likely to provide a cushion.
On the demand front, household consumption increased to 7 percent from 6 percent. Government expenditure also saw an uptick, with improvements in both government consumption and investment.
The front-loading of capital expenditure by both state and central governments (recording a combined 27.8 percent increase year-on-year during the quarter) significantly contributed to growth. A surge in exports before the US tariff hikes also played a pivotal role.
However, India's export advantage is expected to diminish in the upcoming quarters due to the 50 percent tariff hikes instituted by the US. Additionally, a general global slowdown triggered by these tariff actions could dampen external demand further,” Deshpande remarked.
Moreover, the heightened US tariffs and increased uncertainty may negatively affect domestic private investments this fiscal year. The tariffs, combined with a global trade slowdown and geopolitical uncertainties, are anticipated to have varying effects on the Indian economy.
In the absence of a trade agreement between India and the US, certain sectors must prepare for a more significant impact due to the US tariffs.
In particular, the micro, small, and medium enterprises sector, which represents 45 percent of India’s total exports, faces substantial challenges, as highlighted by Crisil.
Point of View
It is evident that India is navigating a complex economic landscape. While the predicted GDP growth reflects resilience, it is crucial to remain vigilant about external pressures such as US tariffs. The government must prioritize support for vulnerable sectors to ensure sustainable growth.
NationPress
30/08/2025
Frequently Asked Questions
What is the projected GDP growth rate for India this fiscal year?
India's GDP is projected to grow by 6.5% this fiscal year.
What factors are driving India's GDP growth?
Robust consumer demand, healthy rural incomes, lower inflation, and increased government spending are key drivers of India's GDP growth.
How will US tariffs affect India's economy?
The recent US tariff hikes could diminish India's export advantage and negatively impact domestic investments.
Which sectors are most vulnerable to the impacts of US tariffs?
The micro, small, and medium enterprises sector, accounting for 45% of India's total exports, faces significant challenges due to the tariffs.
What is the significance of government investment in supporting GDP growth?
Government investment spending provides a buffer that supports overall GDP growth amidst external pressures.
