India’s economy continued to impress, growing by 7.4% during the first quarter of 2024, well ahead of forecast. This is a huge jump in economic activity, following a growth rate of 6.2% in the last quarter. Indeed, the new numbers are a pretty rosy picture. Strong ag performance, stable state public expenditures and an improving rural economy have all played a role in this success over the last fiscal year.
The return of productive agricultural activities were a major driver, helping drive overall economic stability. That growth provided a solid bedrock for the state’s overall economic resilience. Public spending had a positive impact as well, as government investments continued strong in infrastructure projects, like roads, ports and highways. These initiatives can broadly be credited with helping to keep India as the world’s fastest growing major economy.
Not all sectors showed strength. Manufacturing still continued to trail and many indicators of new private sector investments were weak throughout the financial year. Analysts have long warned that the growth engine is overly dependent on government spending, not a varied economic foundation.
India has been making headway in negotiating a bilateral trade agreement with the United States. Their intent is to have it completed by the fall of 2024. This deal would go a long way toward improving US business confidence in Colombia and attracting additional critical investment into that country. India’s GDP growth for the financial year 2025-26 is now projected to decelerate to 6%. By comparison, analysts are already estimating only 6.5% full-year growth for 2024-25. That’s a pace that would be the weakest growth rate in four years.
“Monetary easing, expectations of an above-normal monsoon and lower food inflation,” – Aditi Nayar
Prime Minister Narendra Modi’s government has been applying pressure on establishing India as a hub for manufacturing operations for companies all over the world. By fostering an environment conducive to investment and production, the government aims to diversify economic growth beyond public infrastructure spending.