There was a significant uptick in India’s economic trajectory, in the December quarter of this financial year (Q3FY25), registering a 6.2% real GDP growth rate, compared with a low revised estimate of 5.6% (5.4%) in the previous quarter. To be sure, this growth rate was the slowest since Q4FY23, except for the previous quarter’s 5.6%. The 6.2% growth rate also suggests that the government’s full-year growth target of 6.5% is virtually unattainable, given global headwinds of tariffs that could lead to imported inflation, amid tepid performance by the manufacturing and services sector domestically. The bulk of Q3FY25 growth has been bolstered by the primary sector, with a value-add of 5.2%, up from 1.8% in the same quarter last year. But growth in the secondary and tertiary sectors that make up manufacturing and services slowed to 4.8% and 7.4% respectively, compared with 12.4% and 8.3% last year. While Chief Economic Adviser V. Anantha Nageswaran acknowledged that a growth rate of 7.6% in the current quarter is ambitious amid global economic uncertainties, his suggestion that this growth is attainable sounds rather optimistic, unless the Maha Kumbh propelled a consumption spike that was able to buttress the current quarter’s growth numbers. India’s manufacturing and services sectors remain vulnerable to global trade uncertainties, such as the U.S.’s 25% import tariff on steel, and an equal percentage proposed on pharmaceuticals. About a third (31%) of India’s pharma exports totalling $8.7 billion were to the U.S. in FY24. News of the proposed tariffs has sent shock waves, with some firms suggesting a pivot to producing in the U.S., which could potentially lead to a trade revenue loss for India.

There are bright spots, however. The uptick of 8.3% (2.3%) in government spending and 6.9% (5.7%) growth in private consumption expenditure have been bolstered by a moderation in inflation. The RBI has projected inflation to average 4.8% in FY25, estimating that this would ease further to 4.2% in FY26, indicating a possible alignment with the RBI’s medium-term target of 4%. However, these current estimates have come into question as the National Statistical Office (NSO) indicated that it has attempted a tweaking of its methodology, factoring in “industry-wise/institution-wise detailed information” but not quite elaborating on what material influence this has had on the quality and quantity of the data collected. The NSO went on to say that the ‘overall as well as sectoral variations in advanced estimates is attributed to a revision of benchmark estimates and additional or updated data available on various indicators’. The NSO must clarify this revision in methodology to enable a more informed analysis of the data that it provides.