Why India’s Economy Surged 6.5% in FY25 Despite Global Slowdown

India has once again asserted its position as the world’s fastest-growing major economy, clocking a robust 6.5% GDP growth in FY25, powered by strong domestic consumption, government-led capital investment, and resilience against global export shocks, according to top economists. The highlight? A stunning 7.4% growth in Q4 (Jan–Mar 2025),  the strongest quarterly performance of the fiscal year, surpassing both RBI’s 7.2% forecast and market expectations.

What Drove the Growth?

Economists across the board credited domestic drivers for this impressive performance.
“India’s growth remains resilient due to strong domestic consumption, robust government investment and limited reliance on exports,” said Manoranjan Sharma, Chief Economist at Infomeric Valuations.

Anshuman Magazine, Chairman & CEO of CBRE India, noted a broad-based recovery, with strong activity in rural markets and industrial sectors boosting momentum. He added, “The rebound in construction and financial sectors is reviving real estate confidence and investments.”

Private Investment Picks Up

While government capital expenditure didn’t spike significantly, Gross Fixed Capital Formation rose 8.8%, suggesting increased private capex, according to Ranen Banerjee of PwC India. However, he warned of a weak manufacturing print, calling it a red flag amid looming trade disruptions in FY26.

Govt Spending Kicked 

The growth in the final quarter was also supported by back-ended public capital expenditure, said Madhavi Arora, Chief Economist at Emkay Global.
But she cautioned that global headwinds, softer urban incomes, and a dip in investment sentiment could drag down momentum in FY26.

Outlook for FY26: RBI Predicts Slower Growth

The Reserve Bank of India expects GDP growth to moderate to 6.5% in FY26, as private consumption stabilizes and investment growth faces uncertainty due to global economic volatility.  India's FY25 performance has beaten the odds, proving that domestic strength can offset global weakness. But economists agree: the coming year could test the economy’s resilience like never before.

If private consumption holds and investment momentum continues, India could remain the outlier in a slowing world. All eyes will now be on the RBI’s next monetary policy meeting in June.  Because in a fragile global economy, India’s domestic engine is its strongest defense.

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