Arslan Bodanov | 11.04.2025
Indias' Economy in March 2025
The latest global and domestic economic news in March 2025 presents mixed evidence with both opportunities and headwinds acting on economies globally and domestically. As major economies struggle with inflation, geo-political tensions and reversing trade patterns, India keeps surmounting its own set of issues with comparative resilience.
India's GDP growth in the 2024–25 financial year (FY25), from April 2024 to March 2025, has been updated. After declining to 5.6% annual growth in the second quarter, the economy recovered marginally in the third quarter with 6.2% growth. Even with the recovery, the growth estimate for the full year has been lowered to 6.4%, down from 9.2% in FY24. The declines are attributed to several cyclical and structural causes, such as soft tax collections, poor corporate profitability, and subdued investment by the public sector.
Private consumption remains the mainstay of India's economic growth momentum. Consumer goods, mobility, and the e-commerce sectors experienced steady demand, primarily in urban centers. Government expenditure has instead remained more cautious with efforts to consolidate the state budget constraining the room available to extend loose public expenditure. Corporate investments are also subdued in the presence of global uncertainty and risk-averse investor attitudes.
While headline inflation has been within the Reserve Bank of India's (RBI) 2-6% tolerance level, underlying or core inflation — excluding food and oil — is sticky. Inflation from input costs in construction and the energy sectors is exerting pressure on price increases. The job market is steady, albeit with employment rising unevenly between sectors with tech and manufacturing jobs hiring weakening and service and gig-economy jobs growing. Internationally, American tariff regimes — particularly against Asian exports — disrupted supply chains and raised input costs for the homebuilding and electronics sectors among others. It could have an indirect effect on Indian exporters in textiles, automotive parts, and electronics as demand from advanced markets tapers off.
Additionally, American consumers' confidence has weakened, and growth in the Eurozone has been subdued and could reduce external demand for Indian products and services. Volatility in oil prices, tied to tensions in the Middle East and OPEC+ production actions, also threatens India's import bill and trade balance.
India's financial markets witnessed volatility in the past months on account of both global risk aversion and domestic earnings uncertainty. The benchmark indices Sensex and Nifty experienced fluctuations with the investor mood reacting to global signals, earnings announcements, and monetary policies.
Nonetheless, foreign direct investment (FDI) continues to be strong in high-growth sectors like renewable power, electric cars, digitalization and telecom infrastructure, and pharmaceuticals. The administration keeps driving regulatory reforms like easing compliance by MSMEs and measures to promote innovation by startups that are expected to deliver long-term dividends.
While there are global and domestic issues facing India’s economy, it is on relatively solid ground. Structural reforms, tech adoption, and a youthful population continue to provide long-term promise. Growth will need to be nurtured by pressing policy responses, particularly increasing the level of investment in infrastructure, rural distress issues, and small enterprise support.
As the nation enters the final quarter of FY25, it will be important to emphasize fiscal responsibility, strong domestic consumption and increased export competitiveness to ensure stability in the economy and momentum carryover into FY26.
India's GDP growth in the 2024–25 financial year (FY25), from April 2024 to March 2025, has been updated. After declining to 5.6% annual growth in the second quarter, the economy recovered marginally in the third quarter with 6.2% growth. Even with the recovery, the growth estimate for the full year has been lowered to 6.4%, down from 9.2% in FY24. The declines are attributed to several cyclical and structural causes, such as soft tax collections, poor corporate profitability, and subdued investment by the public sector.
Private consumption remains the mainstay of India's economic growth momentum. Consumer goods, mobility, and the e-commerce sectors experienced steady demand, primarily in urban centers. Government expenditure has instead remained more cautious with efforts to consolidate the state budget constraining the room available to extend loose public expenditure. Corporate investments are also subdued in the presence of global uncertainty and risk-averse investor attitudes.
While headline inflation has been within the Reserve Bank of India's (RBI) 2-6% tolerance level, underlying or core inflation — excluding food and oil — is sticky. Inflation from input costs in construction and the energy sectors is exerting pressure on price increases. The job market is steady, albeit with employment rising unevenly between sectors with tech and manufacturing jobs hiring weakening and service and gig-economy jobs growing. Internationally, American tariff regimes — particularly against Asian exports — disrupted supply chains and raised input costs for the homebuilding and electronics sectors among others. It could have an indirect effect on Indian exporters in textiles, automotive parts, and electronics as demand from advanced markets tapers off.
Additionally, American consumers' confidence has weakened, and growth in the Eurozone has been subdued and could reduce external demand for Indian products and services. Volatility in oil prices, tied to tensions in the Middle East and OPEC+ production actions, also threatens India's import bill and trade balance.
India's financial markets witnessed volatility in the past months on account of both global risk aversion and domestic earnings uncertainty. The benchmark indices Sensex and Nifty experienced fluctuations with the investor mood reacting to global signals, earnings announcements, and monetary policies.
Nonetheless, foreign direct investment (FDI) continues to be strong in high-growth sectors like renewable power, electric cars, digitalization and telecom infrastructure, and pharmaceuticals. The administration keeps driving regulatory reforms like easing compliance by MSMEs and measures to promote innovation by startups that are expected to deliver long-term dividends.
While there are global and domestic issues facing India’s economy, it is on relatively solid ground. Structural reforms, tech adoption, and a youthful population continue to provide long-term promise. Growth will need to be nurtured by pressing policy responses, particularly increasing the level of investment in infrastructure, rural distress issues, and small enterprise support.
As the nation enters the final quarter of FY25, it will be important to emphasize fiscal responsibility, strong domestic consumption and increased export competitiveness to ensure stability in the economy and momentum carryover into FY26.
