The Indian economic landscape saw key updates today, reflecting resilience in business activity alongside adjustments in growth forecasts and significant policy responses to recent events.
Key Economic Developments (April 23, 2025)
- Growth Forecasts Tweaked: Both the World Bank and the IMF recently revised India’s GDP growth forecast slightly downwards for the next fiscal year (FY26, ending March 2026) to around 6.2%-6.3%. This adjustment is primarily attributed to anticipated global headwinds and increased trade tensions, partly stemming from US tariff policies. Despite the trim, India is still projected to be the world’s fastest-growing major economy.
- Business Activity Surges (April PMI): In contrast to the moderated forecasts, the latest Purchasing Managers’ Index (PMI) data for April painted a robust picture. Private sector business activity expanded at its fastest pace in eight months, driven by strong domestic and export demand. Manufacturing PMI reached a one-year high, while Services PMI hit a four-month peak. This buoyancy reportedly led to increased hiring by companies.
- Indus Water Treaty Suspended: In a major geopolitical and economic policy decision following the tragic Pahalgam terror attack, the Indian government announced the suspension of the Indus Water Treaty with Pakistan. This move, along with others like closing the Attari border, signals a significant shift in response mechanisms.
- Monetary Policy Stance: Recent minutes from the RBI’s Monetary Policy Committee (MPC) suggest a continued inclination towards supporting economic growth, especially with inflation perceived as relatively benign (though needing monitoring). The repo rate cuts implemented earlier this year are expected to aid private consumption and investment.
- Trade & Bilateral Ties: Discussions between India and the US on a bilateral trade agreement continue, with US Vice President JD Vance recently visiting and urging India to reduce non-tariff barriers. Concerns about potential US tariffs remain a factor impacting economic sentiment. On another front, India is strengthening energy cooperation with Saudi Arabia, including plans for joint refinery ventures.
The Indian economy continues to navigate a complex global environment. While domestic activity shows strength, external factors and significant policy decisions are shaping the near-term outlook.