Riding the Growth Wave — India’s Economy at a Pivotal Moment
India’s economic story is opening a promising new chapter. According to S&P Global Ratings, the country is projected to grow by 6.5 per cent in the current fiscal year and accelerate to 6.7 per cent in the next.
This projection comes against a backdrop of strong domestic momentum, driven by rising consumption, and helped along by policy choices that aim to unleash that momentum further. At the same time, headwinds remain — most notably, elevated tariffs from the United States are still biting into export-oriented manufacturing.
What’s powering the optimism?
Let’s unpack the drivers:
- First, domestic consumption is stepping into the spotlight. With income-tax rebates raised (the rebate limit was lifted to ₹12 lakh from ₹7 lakh) and goods & services tax (GST) cuts on hundreds of items, the middle class is being empowered to spend more.
- Second, monetary easing is reinforcing the tailwind. The Reserve Bank of India (RBI) cut its policy rate by 50 basis points to 5.5 per cent — a three-year low.
- Third, the pickup in consumption is coming at a time when investment isn’t quite the lead actor — meaning the economy is more consumption-led than investment-led in the near term. S&P notes this shift.
The article also notes that India’s real GDP growth in April–June hit 7.8 per cent, the fastest pace in five quarters.
India’s real GDP growth: a multi-decade view.
What it shows:
According to the World Bank indicator “GDP growth (annual %) – India”, the country’s real growth has averaged around ~6 % since 1951.
Recent data: For example, the quarter to June 2025 shows growth of 7.8 % year-on-year.
This chart allows a visual of the ups and downs (e.g., stronger growth in earlier decades, dips during crises) and helps place the current ~6.5–6.7 % outlook in context.
But beware the cross-winds
Even the best sailboats must navigate some choppy seas. Here are the concerns:
- Export-oriented manufacturing is feeling pressure due to higher tariffs imposed by the U.S. These tariffs increase uncertainty and divert attention and resources from productivity improvements, according to S&P.
- A trade agreement with the U.S. could mitigate some of this uncertainty, yet that remains a risk. S&P suggests that securing such a deal would help lift confidence, especially in labour-intensive sectors.
- While consumption is strong, reliance on it (and less on investment) could leave structural vulnerabilities in the medium term if investment doesn’t pick up. S&P points to balanced risks ahead.
What does this mean for India’s near-term economic story?
India’s trajectory looks solid: with consumption ramping up, rates easing, and policy geared towards supporting growth, 6.5-6.7 per cent growth is a credible base case. That said, the export drag and global trade uncertainties mean that this growth path is not guaranteed — it requires smart policy continuity and external stability.
For businesses and investors, the takeaway is two-fold:
- Focus on sectors buoyed by domestic demand (consumer goods, services, domestic infrastructure) — these are poised to benefit.
- For export-linked sectors, watch the tariff environment, trade-deal outcomes and supply chain shifts closely — risk remains elevated.
Final word
In many ways, India stands at an inflection point. The stars are aligning: strong domestic demand, supportive policy, and improving sentiment. But external shocks — especially trade/tariff risks — can rock the boat. If India manages to keep steering through those external headwinds, the growth story set for the next couple of years could be quite strong indeed.
Reviewed by Aparna Decors
on
November 24, 2025
Rating:
