Bengaluru: India’s economy likely registered stronger growth in the January–March quarter, bolstered by improved agricultural output and a modest rebound in rural demand, according to a Reuters poll conducted among economists. However, lingering weakness in urban consumption and subdued private investment continue to weigh on the country’s broader growth outlook.
The poll, conducted from May 19 to 23, gathered responses from 56 economists. The median forecast projects India’s gross domestic product (GDP) grew by 6.7% year-on-year in the first three months of 2025—up from 6.2% in the previous quarter. Forecasts ranged from a low of 5.8% to a high of 7.5%.
Rural Momentum Amid Inflation Moderation
Rural India, often seen as a bellwether for broader consumption trends, showed signs of revival due to improved crop yields and easing inflationary pressures.
“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,” said Gaura Sengupta, chief economist at IDFC First Bank.
Economists at Citi echoed that view, noting, “resilient (agricultural) activity continues to bode well for rural consumption,” though they remain cautious on urban spending. Citi analysts added they “remain bearish on urban consumption” in the first half of the fiscal year, expecting any meaningful recovery to be policy-driven.
GVA Shows Modest Growth, Fiscal Support Remains Crucial
Gross Value Added (GVA)—a key measure that strips out the impact of taxes and subsidies to provide a clearer picture of economic activity—rose by 6.4%, only slightly above the 6.2% recorded in the previous quarter.
While GDP benefited from reduced subsidy outflows, some analysts caution that the apparent improvement might be more statistical than substantive.
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“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,” said Kunal Kundu, India economist at Societe Generale.
Standard Chartered’s Anubhuti Sahay also pointed to the role of fiscal factors: any uptick in growth was “mainly driven by the positive impact of net indirect taxes as subsidy payments were significantly lower during the period.”
Urban Demand and Investment Outlook Remain Tepid
Despite rural gains, real wages remain subdued, and urban consumption lacks significant momentum.
“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,” Kundu added.
Private investment—vital for long-term growth—remains sluggish amid global uncertainty and inconsistent trade policy, particularly from the United States. A separate Reuters survey revealed that shifting U.S. tariffs have dampened business sentiment, creating headwinds for corporate spending.
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“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.
“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.”
The Reserve Bank of India is expected to cut interest rates again in June, marking what could be a third consecutive reduction to stimulate growth.
