India’s GDP grows 7.4% in March quarter, led by construction and manufacturing

India’s economy expanded 7.4% year-on-year in the January–March quarter, significantly surpassing expectations and marking the strongest quarterly performance since early 2024. According to official data, the surge was fuelled by robust construction activity and a steady rise in manufacturing output.

Asia’s third-largest economy outpaced the Reuters poll projection of 6.7% and improved on the previous quarter’s revised growth of 6.4%. India’s chief economic adviser, V. Anantha Nageswaran, said the country’s growth momentum was notable given the current global slowdown and that India was outperforming many other major economies, including China, which reported 5.4% growth during the same period.

The Reserve Bank of India has forecast GDP growth of 6.5% for the fiscal year beginning April 1. At this rate, India is poised to retain its status as the fastest-growing major economy and may match Japan in economic size at $4.18 trillion, according to IMF estimates.

Gross value added (GVA), considered a clearer reflection of real economic activity, grew 6.8% in the March quarter, compared to a revised 6.5% in the previous three months. Manufacturing output rose 4.8%, improving on the prior quarter’s 3.6% expansion, while construction activity surged 10.8%, up from 7.9%.

Economists interpreted the higher-than-expected GDP print as a sign of recovery from last year’s mid-cycle slowdown. HDFC Bank’s principal economist Sakshi Gupta noted that while recent data pointed to economic resilience, the outlook for the current fiscal year remains clouded by global headwinds and trade tensions.

Concerns have arisen about U.S. President Donald Trump’s proposed 26% reciprocal tariffs on Indian imports. Though currently on hold until at least July 9, these measures add uncertainty to trade and investment planning.

Domestic demand showed signs of mixed trends. Private consumption, which contributes over half of India’s GDP, grew 6% in the March quarter, down from a revised 8.1% previously. Urban spending decelerated, though demand in rural areas, especially for durable goods and agricultural machinery, remained robust.

Retail inflation dropped to 3.16% in April, marking a near six-year low. Thanks to a favourable monsoon forecast, it is expected to stay subdued. Analysts suggest this could give the Reserve Bank of India room to lower interest rates again in the coming months.

Government expenditure contracted by 1.8% during the March quarter after rising 9.3% in the previous period. Meanwhile, capital expenditure increased by 9.4%, although private sector investment may face delays as businesses remain cautious in light of global trade uncertainties.

India’s economy was estimated to be worth 330.68 trillion rupees ($3.87 trillion) at the end of March. For the current fiscal year, economists predict growth could stabilise around 6.5%, supported by improved farm output, lower inflation, monetary easing, and consistent public spending. However, they warn that global volatility could affect trade and investment channels, dampening the momentum if not managed carefully

Source: Reuters