India’s economic outlook resilient for 2025

India’s economic outlook for 2025 is positive, with strong growth supported by urban consumption, a robust service sector, and infrastructure investments. S&P Global and Moody’s, project GDP growth of around 6.6% to 6.8% for FY’25. While challenges like inflation and post-pandemic fiscal weaknesses remain, agencies are optimistic about India’s resilience, with opportunities in equities, bonds, and infrastructure. The government is also focused on sustaining growth, particularly in the second half of the fiscal year.

S&P Global Ratings projects resilient growth for the Indian economy in 2025, driven by strong urban consumption, robust service sector performance, and ongoing infrastructure investments, according to its “India Outlook for 2025” report. For the current fiscal year, the agency maintains a growth projection of 6.8% and forecasts growth to increase to 6.9% in FY’26. The FY’25 growth estimate of 6.8% is 20 basis points (bps) higher than the Reserve Bank of India’s (RBI) forecast of 6.6%.

However, India’s GDP growth for Q2 FY’25 fell to 5.4%, below expectations. S&P Global attributed this weaker performance to slower fiscal stimulus and reduced spending by the urban middle class. The agency also predicts the RBI will ease monetary policy in 2025, reducing the policy repo rate by 50 bps as inflationary pressures decline. S&P estimates retail inflation will average 4.5%, 30 bps below the RBI’s forecast.

Economist Vishrut Rana highlighted challenges such as post-pandemic weaknesses in public and household balance sheets, a competitive global manufacturing landscape, and sluggish agricultural growth. To address these hurdles, he emphasized the need for job creation, infrastructure and technological upgrades, and strengthening household and public balance sheets. He also noted that better urban infrastructure and higher-quality jobs could encourage higher labor force participation.

Moody’s has also highlighted India’s favorable macroeconomic position, describing the country as being in a “sweet spot” with strong growth and easing inflation. Moody’s has projected India’s GDP growth at 7.2% in 2024, followed by 6.6% in 2025 and 6.5% in 2026. The second quarter of 2024 saw a 6.7% year-over-year GDP expansion, supported by household consumption, increased investment, and solid manufacturing activity. Indicators like positive PMI readings, robust credit growth, and consumer optimism signal continued growth. Household spending is expected to remain strong due to festive season purchases and rising rural demand. Private investment is also likely to benefit from higher capacity utilization, strong business sentiment, and the government’s ongoing infrastructure investments. Moody’s further emphasized India’s solid economic fundamentals, such as healthy corporate and bank balance sheets, a resilient external position, and strong foreign exchange reserves, which bolster the country’s growth outlook.

JP Morgan’s 2025 global economic outlook is optimistic, with a low risk of recession, driven by the United States as the primary growth engine. The strong US labor market and advancements in artificial intelligence (AI) are expected to continue supporting global growth, despite some regional slowdowns. Global growth is forecast to ease, with inflation expected to moderate at varying rates across regions.

For India, JP Morgan recommends overweight positions in equities, particularly within the banking sector, and opportunities in Indian rupee bonds. The outlook highlights India’s resilience amid global challenges, offering significant potential for growth in both equities and bonds. Additionally, gold and corporate credit markets are seen as favorable investment options in 2025.

The Q2 growth shortfall prompted other agencies to revise their projections for FY’25. Goldman Sachs cut its forecast by 50 bps to 6%, while UBS lowered its estimate by 40 bps to 6.3%. However, Ajay Seth, Secretary of the Department of Economic Affairs, expressed optimism, stating that the government is implementing measures to achieve 6.5-7% growth for the fiscal year with an anticipates accelerated growth in the second half of the year.