As per the PIB, the latest government data released on 30 May 2025 concluded that India’s fourth quarter GDP increased by 7.4%, but it was gradually seen to slow down in comparison to 2023-24. In 2025, India achieved a global 4th rank in the highest economy of GDP, but seeing this slowdown in GDP in comparison to last year may affect India’s GDP. In this article, we will explore what is happening in India’s economy, the reasons for the slowdown in the Indian economy, and major milestones in achieving a global top GDP rank.
Facts on the Current Indian Economy in GDP growth
- India's GDP rose 7.4% between January and March 2025, which was less than the previous year.
- Growth in FY25 is 6.5%, compared to 9.2% in FY24.
- India has surpassed Japan to become the fourth-largest economy, despite weaker growth.
- Within two to three years, it is anticipated to rise to the third largest.
- Future policy focus: The monsoon and changes in the world economy are likely to have an impact on the RBI's interest rate decisions.
What’s Happening with India’s Economy?
India’s economy is still growing, but the speed of that growth is gradually slowing down. Between January and March 2025, India’s GDP grew by 7.4%, which is still strong but a bit lower compared to the 8.4% growth seen during the same time last year in 2024.
For the entire financial year 2024–25, the growth rate was 6.5%, which marks a clear slowdown from the impressive 9.2% growth recorded in 2023–24.
How did India's economy grow by 7% in the fourth quarter of FY25?
In the fourth quarter of FY25, India’s economy grew by 7% due to several reasons, including:
- Agricultural involvement
- Government spending increases
- Due to the several bilateral agreements of India with other countries
Why is the Indian economy showing a growth slowdown in FY 2024-25?
The Indian economy is showing a slowdown in 2024-25 in comparison with 2023-24 in its growth due to several reasons:
- High Base Effect: Last year’s growth was unusually high as the economy bounced back from COVID-19, so comparisons this year naturally seem lower.
- Global Factors: Fluctuating oil prices, geopolitical tensions (like war or trade disputes), and weaker demand in international markets can all slow exports and investment.
- Domestic Factors: Rising inflation, cautious consumer spending, and uneven recovery across sectors have added pressure.
A Major Milestone Despite the Slowdown
Even with a slower pace, India has achieved something big — it has officially overtaken Japan to become the 4th largest economy in the world, based on GDP measured in US dollars.
As of now, India’s economy is estimated to be worth about USD 4 trillion. This puts it behind only:
1. United States
2. China
3. Germany
And according to economic planners, if things go well, India could become the 3rd largest economy in just 2.5 to 3 years.
What’s Next for Policy Makers?
This GDP data has arrived just before the Reserve Bank of India (RBI) is scheduled to hold its next monetary policy meeting in June 2025. With growth slowing, there might be discussions around cutting interest rates to encourage more spending and investment.
But it’s not just GDP numbers that will decide this — other factors like the monsoon forecast, global inflation trends, and commodity prices will also play a big role.
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