India's Economic Outlook Brightens

India's economy is on the brink of a substantial uplift in the fourth quarter of FY25, fueled by a consistent rise in government spending and capital expenditure (Capex). This growth is further bolstered by a surge in consumption, driven by the Maha-Kumbh and the wedding season, as highlighted in a recent report by Union Bank of India.

The Reserve Bank of India (RBI) has played a pivotal role in supporting this growth trajectory through rate cuts, liquidity provisions, and regulatory adjustments, including the rollback of macroprudential tightening. These strategic measures, alongside the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme, are expected to accelerate credit growth in the near future.

However, the report cautions about potential risks that could hinder economic recovery, such as ongoing tariff wars and increasing geopolitical tensions.

Economic Indicators Show Promising Signs

India's economic growth rate stood at 6.2% in Q3FY25, with signs of recovery emerging. The report projects a 7.6% growth in Q4FY25, indicating a potential turnaround. The Gross Value Added (GVA) also saw a rise to 6.2% in Q3FY25 from 5.8% in Q2FY25, thanks to strong performances in agriculture and manufacturing sectors.

Despite the slowdown in growth compared to previous years, the government's fiscal spending and a resurgence in consumption, driven by seasonal factors, are expected to sustain the economic momentum. Chief Economic Adviser Anantha Nageswaran emphasized the role of strong rural demand and a revival in urban consumption in maintaining this momentum.

RBI's Strategic Measures

In February 2025, the RBI reduced interest rates by 25 basis points to stimulate investment and consumption. The central bank has also been actively managing liquidity through Open Market Operations (OMOs) and implementing regulatory leeways to encourage credit growth, especially for MSMEs and non-banking financial companies (NBFCs).