New Delhi [India], March 26 : The Indian economy is estimated to achieve a growth of 6.5 per cent in FY25 despite considerable external headwinds, the Monthly Economic Review by the Department of Economic Affairs (DEA), Ministry of Finance said.
The Monthly Economic Review added that the performance of the economy in the past quarters was driven by strong agricultural and service sector performance on the supply side and a steady increase in consumption and core merchandise and services exports on the demand side.
"Geopolitical tensions, trade policy uncertainties, volatility in international commodity prices and financial market uncertainties pose considerable risks to the economic growth outlook, globally and locally. One offsetting positive is the outlook for commodity prices. Domestic private sector capital formation, focused on India's solid fundamentals and economic prospects, will be an important driver of economic growth in FY26," the DEF said.
The review document added that all sectors are estimated to grow close to their trend rates.
The International Monetary Fund, in its recent Article IV report published in February 2025, has stated that India's prudent macroeconomic policies and reform-driven approach have positioned it as the fastest-growing major economy, the monthly review added.
Retail inflation eased to 3.6 per cent in February 2025 on the back of recent benign price trends of food items.
Food inflation saw a sharp decline, driven by winter season correction in vegetable prices, continued easing of pulse prices and various administrative measures of the government, the DEA added.
The DEA added that the estimates of agricultural production suggest a positive outlook for food inflation.
As per the second advance estimates, kharif and rabi food grain output is expected to rise by 6.8 per cent and 2.8 per cent, respectively.
Union government finances continue to maintain a fine balance between fiscal consolidation, welfare and growth.
The Union Budget 2025-26 announced a cautiously ambitious debt consolidation path that projects union government debt to decline by at least 5.1 percentage points over a six-year period from 2024-25 to 2030-31.
In the near full-year data available for FY25, there is a close convergence of actual deficits, critical ratios, and essential expenditures with their budget estimates, indicating a sustained commitment to fiscal targets, the Monthly Economic Review added.
In recent months, India's equity markets have declined due to a variety of factors. Chief among them is its stellar performance of the previous four years, leading to profit-taking and a trimming of allocation by foreign portfolio investors, looking for value elsewhere.
The impact of the selloffs in the equity segment was partially offset by robust external inflows into debt markets which were, to an extent, catalysed by India's inclusion into the Bloomberg Emerging Market Local Currency index. Further, Indian retail investors have remained unfazed by the decline and continued to repose faith in the market's long-term potential.
The Monthly Economic Review, however, recognised that te added that global trade continues to be affected by uncertainty in the policy environment.
The Global Trade Policy Uncertainty Index rose to a record high of 237.4 in Q4 2024. Tariff-related developments in multiple countries have heightened trade-related risks, affecting investment and trade flows globally, the DEF added in the monthly review.
Consequently, India's exports have Supportive fiscal measures, accommodative monetary policy, and the Union Budget's focus on longer-term development drivers and reform will bolster domestic economic resilience amidst significant global uncertainties.
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