India’s economy is expected to grow at a slower pace in the current fiscal year, weighed down by subdued private sector investment and uncertainty surrounding American tariffs, according to a Reuters survey of economists.
The fifth-largest economy in the world is projected to expand at an average rate of 6.3 per cent in FY2024 -25, based on a poll conducted from April 15-24 with participation from 54 economists. While this matches last year’s growth, it marks a slight downgrade from the 6.5 per cent forecast in a March survey. It still remains marginally above the International Monetary Fund’s (IMF) recent projection of 6.2 per cent.
However, this represents a significant drop from the 9.2 per cent GDP growth recorded in fiscal year 2023–24, highlighting a slowdown in momentum.
Economists say the headline figures mask deeper structural issues, including the economy’s inability to generate enough high-paying jobs for its growing youth population. Despite government-led infrastructure investments, private sector capital expenditure has remained stagnant over the past decade, leaving India operating below its potential.
The situation is further complicated by the proposed 26 per cent US tariff on Indian imports – currently suspended for a 90-day window starting April 10 — which has raised concerns despite India’s services-heavy exports to the US.
“Middle-class Indians are struggling. Residential building sales, passenger vehicles, and two-wheeler sales have declined. It’s important that domestic policies address the root causes,” said Kunal Kundu, India economist at Société Générale.
“India needs a 1991 moment,” he added, referencing the landmark liberalisation campaign led by then-finance minister Manmohan Singh. “The tariff war offers a perfect opportunity to push for structural reforms. Without them, even as the fastest-growing large economy in a low global growth environment, India may fall well short of its long-term ambition to become a developed nation.”
In the survey, most economists said US tariffs have had a negative or severely negative impact on business sentiment. Some described the effect as neutral.
“Business sentiment has certainly taken a hit — no business wants to make investment decisions in an uncertain and volatile environment. Investment is the most adversely affected component of the economy due to trade tariffs,” said Kanika Pasricha, chief economic advisor at Union Bank of India.
She added that sectors previously poised for growth — including renewables, refineries, steel, and cement — may now scale back or delay capital expenditure plans.
Meanwhile, with concerns of a potential US recession and India’s consumer inflation staying below the 4 per cent medium-term target for two straight months, the Reserve Bank of India (RBI) is expected to continue its moderate rate-cutting cycle. The central bank is likely to reduce rates by 25 basis points in June to 5.75 per cent, and possibly conclude the easing cycle in August at 5.50 per cent, according to the survey.
“The unexpected drop in inflation… has created greater scope for monetary policy support to growth,” noted Dhiraj Nim, economist at ANZ.
For FY2024–25, consumer inflation is projected to average 4.0 per cent, rising slightly to 4.3 per cent in the following fiscal year.
This report based on Reuters survey comes days after the World Bank revised its prediction on India’s growth to 6.3 per cent for FY 2025-26, cut from its previous estimate of 6.7 per cent.
According to the report, as quoted by news agency PTI, “In India, growth is expected to slow from 6.5 per cent in FY2024-25 to 6.3 per cent in FY 2025-26, as the benefits to private investment from monetary easing and regulatory streamlining are expected to be offset by global economic weakness and policy uncertainty.”
The organisation’s assessment indicates that India’s current fiscal performance fell short of projections, primarily due to reduced private sector investments and unfulfilled public capital expenditure objectives.
Read more: World Bank cuts India’s FY26 growth forecast to 6.3% citing global headwinds