Resilient Growth

India’s 7.4 per cent GDP growth in the final quarter of the 2024-25 fiscal year is more than just a statistical surprise ~ it is a testament to the economy’s underlying resilience at a time when global growth remains tentative and fragmented. At a moment when advanced economies are navigating stagnation and major emerging markets like China are struggling to rekindle momentum, India’s growth trajectory appears both exceptional and sustainable, albeit not without its own challenges. The sharp uptick, driven largely by manufacturing and construction, suggests that India’s growth is not only consumption-led but increasingly anchored in productive capacity building.

This is a welcome shift. For too long, economic performance in India has leaned heavily on services and consumer demand, often ignoring the structural uplift that manufacturing and infrastructure investment can provide. The 10.8 per cent surge in construction and the 4.8 per cent expansion in manufacturing offer early signs that the post-pandemic push for capital formation and PLI-linked manufacturing incentives are starting to pay off. Yet, this economic resilience is layered with vulnerabilities. A closer look at the GDP composition shows weakening urban consumption and a contraction in government spending ~ clear signals that all is not uniformly robust. While rural demand seems to be reviving, supported perhaps by the easing of inflation and improving farm sentiment, private investment remains hesitant. The global trade environment, especially the tariff brinkmanship emerging from the US, adds another layer of uncertainty.

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Proposed reciprocal tariffs could undermine India’s export momentum at a time when foreign demand is already weak. Monetary policy may provide some cushion. With retail inflation falling to a multi-year low and monsoon forecasts remaining favourable, the Reserve Bank of India has room to consider further rate cuts. But monetary easing alone cannot anchor long-term investment or employment-intensive growth. Fiscal prudence must now be balanced with targeted expenditure ~ particularly in sectors like agriculture logistics, digital infrastructure, and urban transport ~ where multiplier effects are strong. Importantly, India’s macroeconomic stability ~ low inflation, manageable deficits, and a relatively stable rupee ~ gives policymakers a rare opportunity: to sustain growth without overheating the economy.

The global economy is fractured and volatile, and India’s best response is to remain anchored in domestic fundamentals ~ productivity, competitiveness, and inclusive growth. As India inches toward becoming the world’s third-largest economy by size, it must also prepare for the responsibilities and risks that such scale brings. That includes recalibrating its trade diplomacy, deepening financial markets, and accelerating workforce skilling. A 7.4 per cent quarter should be celebrated, yes, but more as a moment to build on than as a milestone to rest upon. Growth is not an end in itself ~ it must translate into jobs, equity, and lasting economic confidence. The current momentum offers a real chance to do just that.