India’s GDP Growth Forecast for 2025

Goldman Sachs has projected that India’s GDP growth will slow to 6.3% in 2025, primarily due to continued fiscal consolidation and the Reserve Bank of India’s (RBI) macro-prudential tightening. Despite the slowdown, India’s long-term structural growth remains strong, and the country is expected to be somewhat insulated from global trade tensions, particularly between the U.S. and China.

Factors Affecting Growth

Fiscal Consolidation & RBI Policies: The government’s ongoing efforts to manage its fiscal deficit, combined with the RBI’s strict credit regulations, are expected to moderate economic expansion.
Slower Credit Growth: Tightening liquidity conditions may impact consumer and business borrowing, leading to a reduced pace of investment and consumption.
Delayed Rate Cuts: Goldman Sachs predicts that the RBI will delay interest rate cuts until February 2025, with a total expected reduction of 50 basis points throughout the year.

Inflation & Monetary Policy

Inflation is expected to decline to 4.2% in 2025, down from over 7% in 2024.
Food inflation is projected at 4.6%, aided by improved monsoons and agricultural output.
The RBI is likely to adopt a cautious approach to monetary easing, ensuring inflation remains within its target range of 4%.

Outlook on Economic Stability

While the GDP growth rate is projected to slow, this is viewed as a return to a sustainable trend rather than a major economic downturn. Goldman Sachs believes that with stable inflation, a gradual easing of monetary policy, and structural growth drivers, India will continue to be an attractive investment destination.

Risks to the Outlook

Weather-Related Disruptions: Poor rainfall or extreme weather conditions could drive food prices higher, affecting inflation and economic stability.
Global Trade Uncertainties: Any escalation in trade tensions between major economies may indirectly impact India’s export sector.

India’s economic trajectory remains positive in the long run, but the next year will see a more measured and policy-driven growth approach.