India’s economy grew by 6.5 percent in the fiscal year that ended in March, official data showed on Friday, among the world’s top performers but still sluggish compared with its recent track record.
The rise in gross domestic product was well below the 9.2 percent recorded the previous financial year.
The world’s most populous nation grappled with a weaker manufacturing sector, tight monetary policy and muted urban consumer sentiment for most of the past year.
While the economy has rebounded over the past two quarters, helped in part by strong agricultural output, US President Donald Trump’s tariff blitz poses risks to a sustained recovery.
New Delhi, which was slapped with 26 percent so-called reciprocal tariffs is currently negotiating a trade deal with Washington that it hopes will spare it the worst of Trump’s trade push.
Analysts believe the annual growth figures, along with cooling inflation data, will convince India’s central bank to continue its interest rate easing cycle at its review meeting next week.
The GDP figures released on Friday were a little above analyst expectations of 6.3 percent but matched the government’s own projections of 6.5 percent year-on-year growth.
The data for the January-March quarter was brighter, with GDP growing 7.4 percent year-on-year — the fastest this fiscal year and beating analyst estimates of 6.8 percent growth.
The National Statistics Office said in a media release that growth in the March quarter was helped by a surging construction sector.
– Nearing Japan –
While India is still the fastest-growing major economy, the 2024-25 fiscal year growth figures remain below the 8 percent pace that experts say New Delhi needs to create enough well-paying jobs and generate economic prosperity.
The slowdown in economic activity over the past year pushed Prime Minister Narendra Modi’s government into delivering $12 billion in income tax cuts this year, a move aimed at putting more money in the hands of millions of consumers.
The Reserve Bank of India also cut interest rates in February for the first time in nearly five years and delivered another reduction in April.
More recently, public debate over the country’s economic ascent was triggered after a government official claimed India had surpassed Japan to become the world’s fourth-largest economy.
Projections by the International Monetary Fund, however, indicate that the switch will not happen until the end of this year.
The claim nevertheless prompted swift self-praise from bosses of Indian companies and ruling party lawmakers.
Critics on social media responded by noting that the milestone, whenever it happened, would be largely symbolic because India’s current per capita GDP is still a fraction of Japan’s.
Experts also warned that the timeline for India beating out Japan could be delayed by fluctuations in exchange rates.
“Our forecasts suggest that India will overtake Japan by the middle of 2026,” Shilan Shah of Capital Economics said in a note this week.
“But the big picture is that India was always going to overtake Japan — and also Germany — given its positive demographics and scope for continued productivity gains.”
