India’s Economic Crossroads: Soft Industrial Growth, Trade Deficit & Business Caution in H2 2025

Image Source: Praxis Business School

India’s economy is navigating a highgrowth, lowinflation phase, but emerging risks in industrial momentum, trade deficit, and business sentiment warrant close monitoring as H2 2025 unfolds. A recent LLama Research report highlights early signs of industrial slowdown, despite strong services sector growth and moderating inflation.

Key Highlights:

GDP Growth: India’s Q1 2025 GDP surged to 7.4%, up from 6.2% in Q4 2024, with Gross Value Added (GVA) improving to 6.8%.
Industrial Slowdown: The Index of Industrial Production (IIP) dipped to 2.7%, reflecting weakness in mining, manufacturing, and electricity sectors.
Trade Deficit Concerns: Imports rose 5.7% to $656.7 billion, while exports grew marginally by 0.1% to $395.6 billion, widening the trade gap.
Inflation Trends: CPI inflation fell sharply to 2.8% in May 2025, down from 5.2% in December 2024, driven by declining food prices.
Business Sentiment: While Manufacturing PMI remains strong at 58, early signs of caution in corporate investments are emerging.

Despite robust macroeconomic fundamentals, global commodity price swings, rupee volatility, and weak core sector growth pose challenges. As India moves into H2 2025, policymakers and businesses must closely track economic indicators to sustain momentum.

Sources: Economic Times, LLama Research, Press Information Bureau.