Economic Indicators and India's GDP, FDI, and Trade Trends

India's economy continues to demonstrate remarkable resilience, with the country maintaining its position as the world's fastest-growing major economy. In the January-March quarter of 2025, India's GDP surged by 7.4 percent, significantly outpacing analyst expectations of 6.7 percent and marking the strongest growth since the corresponding period in 2024. This robust performance was primarily driven by the construction and manufacturing sectors, supported by reduced government subsidy payments and notable increases in tax revenues.

For the full financial year 2024-25, India's real GDP growth is estimated at 6.5 percent, representing a four-year low but still maintaining the country's status as a global growth leader. The economic survey projects continued strength, with GDP growth forecasted in the range of 6.3-6.8 percent for FY 2025-26. The International Monetary Fund projects India's economy to grow at 6.2 percent in 2025 and 6.3 percent in 2026, maintaining its lead over global peers.

India's GDP performance trajectory

Private consumer expenditure, constituting 57 percent of India's GDP, increased by 6 percent year-on-year in the January-March period, though this was down from 7.1 percent in the previous quarter. The moderation was attributed to improved rural demand for durable goods and agricultural equipment, while urban spending remained subdued.

India achieved a significant milestone in FY 2024-25, recording Foreign Direct Investment inflows of US$ 81.04 billion, marking a 14 percent increase from US$ 71.28 billion in the previous fiscal year. This growth reflects India's enhanced appeal as an investment destination, supported by investor-friendly policies that allow 100 percent FDI through the automatic route in most sectors.

Sectoral FDI Distribution

The services sector emerged as the top recipient of FDI equity in FY 2024-25, attracting 19 percent of total inflows worth US$ 9.35 billion, representing a remarkable 40.77 percent increase from US$ 6.64 billion in FY 2023-24. Computer software and hardware followed with 16 percent of total inflows, while trading accounted for 8 percent.

Manufacturing FDI demonstrated particularly strong growth, increasing by 18 percent to US$ 19.04 billion compared to US$ 16.12 billion in FY 2023-24, positioning India as an emerging manufacturing hub. This growth aligns with the government's "Make in India" initiative and production-linked incentive schemes.

State-wise FDI Distribution

Maharashtra maintained its dominance as India's leading FDI destination, accounting for 39 percent of total FDI equity inflows in FY 2024-25. The state recorded inflows worth US$ 16.651 billion during the fiscal year, leveraging its robust industrial infrastructure and investor-friendly policies. Karnataka followed with 13 percent of total inflows, while Delhi captured 12 percent.

Country-wise FDI Sources

Singapore retained its position as the largest source of FDI into India, contributing 30 percent of total inflows, followed by Mauritius with 17 percent and the United States with 11 percent. This diversification reflects India's growing global appeal, with the number of source countries increasing from 89 in FY 2013-14 to 112 in FY 2024-25.

Over the past eleven financial years (2014-25), India attracted FDI worth US$ 748.78 billion, reflecting a 143 percent increase over the previous eleven years, constituting nearly 70 percent of the total US$ 1,072.36 billion received over the past 25 years.

India's trade performance in FY 2024-25 reflects a dynamic economy navigating global challenges while maintaining export momentum. Total exports (merchandise and services combined) for April-December 2024 reached US$ 602.64 billion, registering a positive growth of 6.03 percent compared to US$ 568.36 billion in the corresponding period of 2023.

Export performance analysis

Merchandise exports during April-December 2024 totaled US$ 321.71 billion, showing modest growth of 1.6 percent from US$ 316.65 billion in the same period of 2023. However, services exports demonstrated stronger performance, contributing US$ 280.94 billion and growing by 11.6 percent compared to US$ 251.71 billion in the previous year.

Key drivers of merchandise export growth included electronic goods, which increased by 35.11 percent in December 2024, engineering goods with 8.35 percent growth, and rice exports surging by 64.03 percent. Ready-made garments of all textiles also showed positive momentum with 12.89 percent growth.

For the full fiscal year 2024-25, total exports (merchandise and services) are projected to reach approximately US$ 820.93 billion. This represents continued progress toward India's ambitious target of US$ 2 trillion in exports by 2030.

Import trends and trade balance

Total imports during April-December 2024 reached US$ 682.15 billion compared to US$ 638.03 billion in the corresponding period of 2023. The merchandise trade deficit for April-December 2024 stood at US$ 210.77 billion, compared to US$ 189.74 billion in the same period of 2023.

Crude oil and petroleum products remained India's largest import category, reflecting the country's continued energy dependence. Gold imports also showed significant volatility, with substantial increases driven by cultural demand and investment preferences. Electronics, machinery, and chemicals continued to dominate the import basket, supporting India's manufacturing and infrastructure development needs.

India's top trading partners 

The United States emerged as India's largest export destination, accounting for 17.73 percent of total exports worth US$ 77.52 billion. China remained the largest source of imports despite ongoing trade tensions, with imports reaching US$ 101.75 billion. The UAE continued to be a significant trading partner, facilitating both exports and imports due to its strategic geographic location.

Economic outlook and policy measures

India achieved a significant milestone in inflation management during FY 2024-25, with retail inflation dropping to 4.6 percent, the lowest since 2018-19. The year-on-year inflation rate for March 2025 fell to 3.34 percent, marking the lowest monthly inflation rate since August 2019. This achievement reflects the effectiveness of the Reserve Bank of India's monetary policy framework and strategic government interventions.

The RBI responded to changing economic conditions by adopting a more accommodative stance, cutting the repo rate by 50 basis points in June 2025 and reducing the Cash Reserve Ratio to inject approximately Rs 2.5 lakh crore of liquidity into the banking system. The central bank revised its inflation outlook downward to 3.7 percent for the year while maintaining focus on supporting growth momentum.

Employment and labor market

India's unemployment rate showed marginal improvement, declining to 4.9 percent in 2024 from 5.0 percent in 2023 among people aged 15 years and above. The overall improvement was driven by modest drops in rural unemployment from 4.3 percent to 4.2 percent, while urban unemployment remained steady at 6.7 percent. The Labor Force Participation Rate stayed stable at 56.2 percent, indicating consistent workforce engagement.

Infrastructure investment and development

The government continued its emphasis on infrastructure-led growth, allocating over Rs 11.5 lakh crore for capital expenditure in Budget 2025. This includes the establishment of an Urban Challenge Fund worth Rs 1 lakh crore to support 25 percent of bankable urban development projects. The railway sector received Rs 253,424.65 crore, reflecting the government's commitment to enhancing connectivity and reducing logistics costs.

India's infrastructure spending crossed Rs 10 lakh crore in 2023-24, supported by the PM Gati Shakti Master Plan, which has contributed to reducing logistics expenses and improving economic efficiency. The second Asset Monetisation Plan (2025-30) aims to reinvest Rs 10 lakh crore into new infrastructure projects over five years.

Future growth prospects

India's economic trajectory remains positive despite global headwinds, with projections indicating sustained growth leadership among major economies. The OECD estimates India's GDP growth will continue to be the highest among G20 nations, touching 6.3 percent in 2025 and 6.4 percent in 2026. UBS projects India will maintain potential real GDP growth of 6.5 percent over FY 2026-28, positioning it to become the world's third-largest consumer market by 2026 and third-largest economy by 2027.

The economic outlook is supported by several structural advantages including demographic dividends, digital transformation initiatives, manufacturing sector expansion, and continued infrastructure development. However, challenges remain, including the need to create productive employment for the growing working-age population, managing external economic uncertainties, and balancing growth with environmental sustainability.

India's nominal GDP is expected to increase from US$ 4 trillion in FY 2024-25 to over US$ 6 trillion by FY 2029-30, supported by productivity improvements, efficiency gains, and expanding global market integration.