Image Source: The Economic Times
India’s economic growth has reached a five-quarter high, with a GDP increase of 7.8% in the April–June 2025 quarter. This remarkable achievement has been largely attributed to a series of government reforms coupled with substantial fiscal discipline, with industry leaders across India Inc expressing widespread confidence in the country’s ability to sustain robust growth despite global economic challenges—most notably, retaliatory US tariffs and uncertain export markets.
Key Highlights
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India’s real GDP growth stood at 7.8% in Q1 FY2025-26, outpacing China’s growth of 5.2% and making India the fastest-growing major economy worldwide.
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Industry leaders, including representatives of CII, FICCI, and Assocham, credit continued government reforms, strategic fiscal policies, and increased domestic demand for the country’s standout performance.
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Key policy moves such as income tax relief, repo rate reductions by the Reserve Bank of India, government infrastructure push, and proposed GST reforms have driven consumption and private investment.
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The revival of private capital expenditure alongside significant government spending has set the stage for a new cycle of investments, promising large-scale job creation.
Industry Response and Confidence
Business leaders remain optimistic about India’s ability to withstand global pressures, with CII President Rajiv Memani describing India’s economic strength as a direct result of increased government expenditure and successful reforms. Chandrajit Banerjee, CII Director General, remarked on new project announcements, noting clear signs of revived private capital expenditure that complements government infrastructure initiatives, pointing to an imminent investment surge and subsequent employment growth.
Economic actors see the government’s fiscal prudence as a buffer against external shocks, with Harsha Vardhan Agarwal, FICCI President, highlighting the role of tax relief, monetary easing, and healthy monsoon progress in supporting domestic demand. These factors, alongside the anticipated GST resetting, are seen as key shields against anticipated export weakness from US trade penalties.
Government’s Fiscal Roadmap and Policy Actions
The Modi-led administration has been lauded for maintaining fiscal discipline, setting a deficit target of 4.4% for FY2025-26 and keeping public debt under control despite global headwinds. The government’s commitment to structural reforms is evident in its push for direct tax regime simplification, targeted spending, and upcoming GST rate rationalization, which policymakers expect to further enhance consumption and investment flows.
Sectoral Performance and Consumption Drivers
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Services, manufacturing, agriculture, and construction emerged as key growth contributors, propelled by continued improvement in government final consumption expenditure, which rebounded from previous contractions to rise 7.4% year-on-year.
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Private final consumption expenditure saw a 7% increase during the quarter, helping insulate the economy from weaker export performance.
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Gross fixed capital formation rose 7.8%, signaling sustained investment—even as global headwinds led to a contraction in certain export-facing sectors such as textiles, gems, jewellery, and leather goods.
Upcoming Challenges and Outlook
While the current headline numbers have surpassed expectations, economists caution that growth may moderate in the coming quarters as the impact of public spending wanes and external pressures escalate. The much-anticipated next-gen GST reforms and additional structural policy measures are, however, set to provide critical support by boosting consumption and job opportunities across the economy.
Source: The Hans India, Rediff, Economic Times, DTNext, Business Standard, Indian Express
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