India’s economic growth likely accelerated in the January–March quarter, supported in part by stronger rural spending driven by improved agricultural output, even as urban consumption remained relatively modest, according to a Reuters poll of economists.
The median forecast from the May 19–23 survey of 56 economists estimated GDP growth at 6.7% year-on-year, up from 6.2% in the previous quarter, with projections ranging between 5.8% and 7.5%.
“If you look at the real growth momentum ... we are seeing some signs of a pickup on the rural side, by the fact that crop output is better, followed by moderation in inflation pressures,” according to Gaura Sengupta, chief economist at IDFC First Bank.
Whereas Citi economists stated: “Resilient (agricultural) activity continues to bode well for rural consumption,” adding that they “remain bearish on urban consumption” in the first half of the current fiscal year.
The Reserve Bank of India is anticipated to lower interest rates for a third straight meeting in June. However, Anubhuti Sahay, Head of India Economic Research at Standard Chartered, noted that the uptick in growth was largely influenced by the positive effect of net indirect taxes, as subsidy payouts were considerably reduced during the quarter.
Furthermore, economic activity, measured by Gross Value Added (GVA), a more consistent indicator that excludes the impact of indirect taxes and subsidies, rose by a moderate 6.4% in the first quarter of 2025, up slightly from 6.2% in the previous quarter.
In the absence of stronger domestic demand, GDP growth is expected to remain heavily dependent on government expenditure, as has been the case in recent years, Reuters reports.
“The recovery is possibly more in numbers than in real improvement in activity. Weak investment prospects, exacerbated by struggling manufacturing suggest a growth recovery is multiple quarters away,” stated Kunal Kundu, India economist at Societe Generale.
“There was some sense of improvement in rural demand but real wages are still not showing signs of meaningfully moving up. Rural demand is ... not strong enough to be an important growth driver on its own as it's just showing some signs of moving up from a weak base, while urban demand continues to be weak.”
Economists also warned that unpredictable US trade policies since the beginning of the year create an uncertain environment for future growth.
A separate Reuters poll conducted last month revealed that US tariffs have dampened business confidence, casting doubt on the anticipated rebound in corporate investment.
“Private investments ... whatever interest rate cuts you do, I don't think will move significantly higher simply because private investments will be determined more by a relatively certain atmosphere,” commented Indranil Pan, chief economist at Yes Bank.
“It's ultimately the outlook from the demand and overall sentiment ... that can help, which currently is unfortunately not getting any help because of the uncertainty that is there in the global system.”