India’s Economic Growth Rises By 6.2%

India-West News Desk

NEW DELHI—India’s economy expanded by 6.2% in the October-December quarter, driven by increased government expenditure and rising consumer demand, official data revealed. Despite being the world’s fastest-growing major economy, India faces external headwinds, including potential trade frictions with the U.S. under former President Donald Trump’s tariff policies. The government remains optimistic about stronger growth in the ongoing quarter.

While rural demand provided a crucial boost, the manufacturing sector showed signs of stagnation. The expansion fell short of post-pandemic peak growth levels and was slightly below the 6.3% forecast in a Reuters poll. The Reserve Bank of India had projected a higher 6.8% growth rate for the quarter. In comparison, GDP had expanded by 5.6% in the previous quarter, with Gross Value Added (GVA)—a key indicator of economic activity—rising by 6.2% from a revised 5.8% in the prior quarter.

For the full fiscal year, the government raised its GDP growth estimate to 6.5%, up from an initial 6.4% projection but significantly lower than the previous year’s 9.2% expansion. Achieving this target would require an ambitious 7.6% growth in the January-March quarter. Chief Economic Adviser V. Anantha Nageswaran expressed confidence in reaching this goal, citing steady rural consumption and an urban recovery. However, weak employment growth and sluggish incomes have weighed on consumer spending.

Retail inflation, which remained elevated for most of last year, eased to 4.3% in January. The Reserve Bank of India expects an average inflation rate of 4.2% in the upcoming financial year. Government spending surged by 8.3% in the last three months of 2024, compared to a modest 3.8% increase in the previous quarter. Meanwhile, private consumer spending grew 6.9% year-on-year, buoyed by moderating food prices and a robust festive season, according to Reuters.

In a bid to support economic momentum, the central bank cut interest rates this month for the first time in nearly five years and hinted at potential further reductions if inflation continues to decline. Additionally, the personal income tax cuts announced in the February 1 budget are expected to stimulate consumption. Many economists predict at least one more rate cut in April when the monetary policy committee convenes, Reuters reported.