India’s economy is currently showing strong signs of resilience. From tax collections to export orders and even monsoon forecasts, positive indicators are emerging from all directions. But the question remains — is this growth sustainable, and what factors could potentially slow it down?
Let’s break it down.
India to Become the World’s Fourth-Largest Economy in 2025
India is on track to become the world’s fourth-largest economy in 2025. According to the International Monetary Fund’s (IMF) World Economic Outlook April 2025 edition, India is set to surpass Japan, with an estimated GDP of $4,187.017 billion, slightly ahead of Japan’s projected GDP of $4,186.431 billion.
The IMF also forecasts that India could overtake Germany in the years ahead and become the third-largest economy by 2028, with a projected GDP of $5,584.476 billion, compared to Germany’s estimated GDP of $5,251.928 billion.
India is also progressing rapidly toward becoming a $5 trillion economy by 2027, with its GDP expected to reach around $5,069.47 billion.
GST Collection Hits Record High
India’s GST collection in April 2025 stood at Rs 2.37 lakh crore, the second-highest monthly figure since the tax regime was launched on 1 July 2017. To put that in context, the collection in August 2024 was Rs 1.75 lakh crore.
According to government data released on 1 May 2025, GST revenue from domestic transactions rose by 10.7% to Rs 1.9 lakh crore, while revenue from imported goods increased by 20.8%, reaching Rs 46,913 crore.
Refunds issuance in April surged by 48.3% to Rs 27,341 crore. After accounting for refunds, net GST collection for April rose by 9.1% to over Rs 2.09 lakh crore, reflecting improved tax compliance and continued economic recovery.
Manufacturing and Exports Show Strong Momentum
A recent report by HSBC noted that India’s Services Purchasing Managers’ Index (PMI) rose to 58.7 in April 2025, up from 58.5 in March. This steady rise has been attributed to robust demand for services and a surge in new business orders. The data reflects strong domestic demand, and notably, export orders have grown at the fastest pace in the past 14 years.
It’s important to note that a PMI reading above 50 signals expansion in the sector. HSBC India stated that rising client orders and a strong market environment are driving the sector forward.
Additionally, in FY 2024-25, non-petroleum merchandise exports reached an all-time high of $352.9 billion. Companies are rushing to fulfil orders ahead of a 90-day tariff freeze imposed by the US.
Moreover, global giants like Apple are shifting their supply chains from China to India, strengthening India’s position as a manufacturing hub.
Forecast for a Better-Than-Normal Monsoon
On 15 April, the Indian Meteorological Department (IMD) forecasted a better-than-normal monsoon for 2025, with a neutral El Niño-Southern Oscillation (ENSO) condition expected to prevail. The monsoon is critical for India’s agriculture sector, which supports 42.3% of the population’s livelihood and contributes 18.2% to the GDP.
About 52% of the country’s cultivable land relies on the monsoon. It also plays a key role in replenishing water reservoirs that supply drinking water and hydroelectric power.
A good monsoon season can boost rural consumption, while factors like lower inflation, reduced taxes, and cheaper loans could spur urban consumer spending. Additionally, a stronger rupee and a drop in crude oil prices may reduce the import bill and help keep inflation under control.
The Role of Policy Reforms
India is currently in the final stages of free trade negotiations with countries like the US, UK, and the European Union. If successful, these agreements would give India more competitive access to major global markets.
At the same time, the government is focused on reducing the fiscal deficit. If public spending is kept in check, industries could gain access to cheaper credit, encouraging private investments and supporting broader economic growth.
What Risks Lie Ahead?
While the economic indicators are promising, some risks do exist. Tensions between India and Pakistan have escalated following a recent terrorist attack in Pahalgam.
On another front, the US economy shrank by 0.3% in Q1 2025. Although the IMF hasn’t forecasted a recession in the US, uncertainty still lingers. A slowdown in the US and other major economies could spill over into India, affecting exports and investor sentiment.
*The article is for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
