The Economy's Gaining Strength and So Is the Urgency of Reforms

India must act quickly to gain from the opportunities that a global trade shake-up could open up

- Rajani Sinha is chief economist at CareEdge.

Concerns around India's growth have been tempered by recent gross domestic product (GDP) data. The GDP growth of 7.4% for the fourth quarter of 2024-25 is much higher than market expectations. For the full year, while GDP growth at 6.5% is lower than the 9.2% growth recorded in 2023-24, it is still commendable amid the global turbulence.

Last quarter's GDP growth was led by a jump in investment growth (gross fixed capital formation) to 9.4% from an average 6.2% in the previous three quarters. This was mainly driven by a sharp increase in the government's capital expenditure after the dull first two quarters of 2024-25. Amid concerns around weak urban demand, there has been a moderation in private consumption growth to 6% in the January-March quarter from an average of 7.6% in the previous three quarters. On the external front, India's export growth moderated, as expected, but a sharp fall in imports resulted in a positive contribution of net exports to GDP.