India’s Jan–March GDP growth seen at 6.7% on rural boost

India’s economy likely expanded 6.7 per cent year-on-year in the January–March quarter, up from 6.2 per cent in the previous quarter, according to a Reuters poll of 56 economists conducted between May 19 and 23.

The improvement of Asia’s third-largest Gross Domestic Product (GDP) is reportedly attributed to better agricultural output and a modest pickup in rural demand, even as urban consumption remained sluggish.

This acceleration comes at a time when global economic uncertainty is rising, particularly in light of escalating trade tensions triggered by US President Donald Trump’s tariff threats.

What does the poll says?

According to the Reuters poll, rural consumption saw signs of recovery thanks to stronger crop yields and easing inflation. “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,” said Gaura Sengupta, Chief Economist at IDFC First Bank, as quoted by Reuters.

Economists at Citi also told Reuters that “resilient agricultural activity continues to bode well for rural consumption,” but flagged that urban demand is still soft, adding they “remain bearish on urban consumption” for the first half of the current fiscal year.

While headline GDP is projected to grow 6.7 per cent, Gross Value Added (GVA), a metric that excludes taxes and subsidies is expected to show a more modest rise of 6.4 per cent, Reuters reported.

Anubhuti Sahay, Head of India Economic Research at Standard Chartered, told Reuters that much of the GDP boost could be driven by lower subsidy payouts: “Any growth improvement was mainly driven by the positive impact of net indirect taxes as subsidy payments were significantly lower during the period.”

IMF and RBI outlook on India

The International Monetary Fund (IMF) has projected India’s GDP growth at 6.8 per cent for FY25, supported by a strong services sector, robust domestic demand, and demographic advantages. However, the IMF has also cautioned that geopolitical tensions and protectionist policies could pose downside risks.

The Reserve Bank of India (RBI), which is expected to cut interest rates for a third consecutive time in June. The central bank has also reiterated that a revival in domestic demand and private investment is critical to sustaining momentum.

Global uncertainty looms large

As per the Reuters report, economists remain concerned about Trump’s intensifying trade war and its ripple effects. The US president has threatened steep tariffs on goods from the European Union and China, while also targeting global tech firms.

“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,” said Indranil Pan, Chief Economist at Yes Bank, in an interview with Reuters.

In a separate Reuters survey last month, businesses flagged the negative impact of US tariff policies on global sentiment, a trend that could stall India’s long-anticipated private investment revival.

“The recovery is possibly more in numbers than in real improvement in activity,” noted Kunal Kundu, India Economist at Societe Generale, speaking to Reuters. “Weak investment prospects, exacerbated by struggling manufacturing, suggest a growth recovery is multiple quarters away.”

The National Statistical Office (NSO) is scheduled to release the official GDP data for the March quarter on May 31. Economists will be watching closely to assess the durability of the rural rebound and the real depth of India’s growth momentum as global headwinds persist.