India’s financial system grew by way of faster-than-expected 7.4% within the March quarter

India’s financial system expanded at a faster-than-expected annual price of 7.4% within the quarter ended March, in spite of the rising uncertainty within the international financial system.

The gross home product within the first 3 months of 2025, or the fourth quarter of the federal government’s fiscal yr 2025, was once sharply upper than the 6.7% expansion forecast by way of economists in a Reuters ballot.

That marked the most powerful quarterly expansion within the fiscal yr of 2025, accelerating from a 6.2% growth within the earlier quarter, consistent with executive information launched Friday.

For the total fiscal yr of 2025, India’s financial system expanded by way of 6.5%, in keeping with the executive’s February estimate.

Growth outlook in Asia’s third-largest financial system has remained somewhat powerful, because of sturdy home intake and somewhat decrease dependence on exports, cushioning the blow from U.S. President Donald Trump’s erratic industry coverage.

Trump remaining month slapped price lists of 26% on items imported from India as a part of his “reciprocal” tasks on over 180 nations, simplest to position them on a 90-day pause days, permitting countries, together with India, to barter offers with the U.S. A 10% base tariff continues to use throughout the pause.

India these days runs a just about $46 billion surplus with the U.S., consistent with executive information.

New Delhi is noticed by way of some as the following in line to clinch a maintain the U.S., following its agreements with China and the U.Ok. Trump reportedly stated previous this month that India had presented 0 price lists on all U.S. imports.

The Reserve Bank of India reduce rates of interest remaining month for a 2nd consecutive time to 6% and shifted its coverage stance to accommodative in a bid to strengthen expansion. The central financial institution is anticipated to ship any other price reduce in June.

“Falling inflation, downside risks to growth to prompt another cut to repo rate next week, said Shilan Shah, deputy chief emerging markets economist at Capital Economics, forecasting the repo rate will fall to 5.5% in the current easing cycle.

The ceasefire in Kashmir is “fragile and tensions may just simply construct once more,” which in turn may hold back investment and consumption, added Shah. Tensions between India and Pakistan boiled over earlier this month leading to military actions between the two nuclear-armed neighbors.

That said, India’s growth story could still hold, in part helped by the improving consumer demand in rural areas. Consumption contributed over half of India’s economy, with rural areas accounting for nearly 40% of overall consumer goods sales in the first quarter of 2025, data from market research firm NielsenIQ showed.

International Monetary Fund projects India’s economy to reach $4.187 trillion in 2025, modestly overtaking Japan’s $4.186 trillion, making it the sector’s fourth-largest financial system.

“India was once at all times going to overhaul Japan – and likewise Germany – given its sure demographics and scope for persevered productiveness positive aspects,” said Shah, adding that “it is not a stretch to assume that, by way of 2040, India’s financial system may well be the scale of Germany’s and Japan’s [economy] blended.”