India's economic journey has been marked by resilience and steady progress in recent years, navigating challenges both domestically and globally. As the global economy faces rising uncertainty, the big question for India’s economy is whether the country can maintain its growth trajectory, or if the pace will slow down in FY26.
The World Bank’s latest report projects India’s economic growth to remain robust at 6.7% annually over the next two fiscal years, starting in April 2025. This steady growth is driven by the resilience of India’s services sector, which continues to perform well, alongside the manufacturing sector benefiting from the government's efforts to enhance the business environment. Government initiatives, such as the “Make in India” campaign and various incentives to boost local manufacturing, are expected to further stimulate this sector.
Private investment is anticipated to play a significant role in supporting growth, especially in light of a potential slowdown in public spending. However, while the outlook for the medium term remains positive, there are challenges ahead. The World Bank has slightly downgraded its growth forecast for FY25, predicting a more modest growth rate of 6.5%. This revision is attributed to weaker manufacturing performance and a slowdown in investment activity, both of which could dampen overall economic momentum. Despite this, private consumption is expected to provide a cushion for the economy, fueled by higher rural incomes and an improved agricultural output.
At the domestic level, a similar sense of tempered optimism prevails. The Federation of Indian Chambers of Commerce and Industry (FICCI) Economic Outlook Survey forecasts a GDP growth rate of 6.4% for FY25, a slight reduction from earlier expectations of 7%. Other rating agencies, such as Acuité and CareEdge, predict growth within a similar range of 6.4-6.5%. Meanwhile, Nomura has a more optimistic outlook, forecasting 6.7% growth, and the Reserve Bank of India (RBI) has revised its own FY25 growth projection to 6.6%.
India’s GDP growth has experienced significant fluctuations in recent years, with an impressive 9.7% growth in FY22, followed by 7% in FY23 and 8.2% in FY24. Looking ahead, the country’s economic performance will depend on a variety of factors. Key among them are the forthcoming Budget 2025 announcements, which could offer stimulus or structural reforms, the trajectory of global economic growth, the direction of interest rates, and the potential impact of global financial turbulence.
Despite the risks, India’s growth story remains one of resilience and adaptability. The government’s focus on expanding infrastructure, driving digitization, and fostering innovation in key sectors could be vital in sustaining the growth momentum. If private investment and consumption continue to rise, and if global conditions improve, India may be able to maintain its impressive growth trajectory even amidst global uncertainties.
