India's Economic Ascent: Projected to grow 6.8 pc in FY25, country eyes upper-middle-income status by 2031

India's economic trajectory is on an upward swing, with a forecasted 6.8 per cent growth in the next fiscal year, according to ratings agency Crisil.

The nation's pursuit of becoming the world's third-largest economy by fiscal year 2031 has gained momentum, backed by domestic reforms and favourable cyclical factors.

The projections indicate a potential shift to upper-middle-income status, marking a significant milestone in India's economic landscape.

Growth predictions and milestones

Crisil's India Outlook report projects India's GDP to grow by 6.8 per cent in fiscal year 2025, following a better-than-expected 7.6 per cent growth in the current fiscal year.

Over the subsequent seven years, from 2025 to 2031, the Indian economy is poised to exceed $5 trillion and approach $7 trillion.

This growth trajectory places India on track to become the world's third-largest economy, accompanied by a per capita income reaching $4,500 by fiscal year 2031.

Upper-middle-income aspiration

The anticipated rise in per capita income to $4,500 by fiscal year 2031 positions India within the upper-middle-income category, as defined by Crisil.

Currently the fifth-largest economy globally, India's ascent toward the $6.7 trillion milestone is underpinned by robust growth expectations, driven by manufacturing, services, and strategic reforms.

The World Bank classifies upper-middle-income economies with a Gross National Income (GNI) per capita ranging from $4,256 to $13,205.

Economic drivers and sectoral growth

Crisil's Chief Economist, Dharmakirti Joshi, highlighted that manufacturing and services would be add most to India's growth.

The report noted that manufacturing is thriving, propelled by factors such as global supply-chain diversification, infrastructure investment, and green transition initiatives.

The ratings agency foresees manufacturing and services growing at 9.1 per cent and 6.9 per cent, respectively, between fiscal years 2025 and 2031.

Despite manufacturing growth, services are expected to remain the dominant driver of India's overall economic expansion.

Economic landscape and global impact

The report highlights India's position as the world's fastest-growing major economy, even as the nation eyes a growth rate slightly below the Reserve Bank of India's (RBI) projection of 7 per cent in the next fiscal year.

With the economy soaring ahead in the December quarter, key sectors like mining, manufacturing, construction, and services are instrumental in driving India's economic expansion.

Crisil envisions sustained growth momentum throughout the decade, fuelled by private sector investments, government infrastructure spending, ongoing reforms, and advancements in digital and physical connectivity.

Inflation

Crisil anticipates a dip in inflation in the upcoming fiscal year, attributed to reduced input costs, subdued domestic demand, improved agricultural production, and stable oil and commodity prices.