India’s GDP Surge 2025: What the New Growth Numbers Mean for Markets

If you clicked to know why India’s economy is making headlines, you are exactly where you should be. Recent official data shows a strong push in growth, jobs and investment. 

This blog explains what is driving the momentum and highlights the policy moves that matter. Read on for a clear view of India budget 2025 expectations after its GDP growth.

India’s Growth: What the Numbers Say 

The GDP of India increased by 7.8% year on year from April-June 2025 compared to 6.5% year on year in the corresponding period the year before. Output in Q1 of FY 2025-26 in value terms was approximately ₹47.89 lakh crore as compared to ₹44.42 lakh crore last year.

This places India as one of the fastest developing large economies, and it is projected to be numbered in three in 2030.

Which Sectors are Lifting Growth 

A closer look shows strength across sectors. 

• The services sector was the first to rise sharply with a high growth of 9.3% mainly due to the trade sector, hotels, transport, communications, financial and professional services, and government activity.
• The manufacturing increased by 7.7% and construction by 7.6%.
• Growth of agriculture and related activities increased by 3.7%, which was a significant measure of improvement compared to the 1.5% previously.

Industrial Output in India and What It Means 

The Index of Industrial Production or IIP reached a growth of 3.5% in July 2025. The key contribution was made by manufacturing, 14 out of 23 groups of industries recorded positive growth.

Basic metals, electrical equipment and non-metallic mineral products were also considered as top performers. Rising factory output suggests firms are producing more to prepare for future orders.

As per India finance news, even after 50% tariffs on US exports, economists still think that India’s GDP growth will not be affected by this. 

Consumption Is Picking Up Again

1. Household spending

Rural demand is finally showing signs of revival, and urban areas continue to spend strongly. When households buy more, companies earn more and hire more people, which further adds to momentum.

2. Government spending

Government final consumption also increased. Higher spending on public services and infrastructure adds stability to overall demand.

What GDP Growth Means for Markets?

India posted 8.2% GDP growth in Q2 FY26, pointing to about 7.5% growth for the full year. This makes India the fastest-growing major economy. But here’s how markets are responding to it. 

1. Stock Market Impact

The Nifty’s one-year return is under 8% and this shows that markets are not matching GDP momentum.

The GDP deflator for the quarter is just 0.5% compared to the 10-year average of around 5%.

Because of this:

• Nominal GDP is only 8.7%, much lower than expected.
• Markets rely more on nominal GDP, since it influences revenues, profits, wages, and taxes.
• Lower nominal growth makes future earnings look softer.

 

Inflation fell to 0.25% in October 2025, and even negative after adjusting for gold prices. Also, foreign investors withdrew ₹27,000 crore in FY26 after pulling out ₹1.23 trillion last year.

2. Sectoral Opportunities

• IT and Services

India’s software product industry will be ₹8,62,000 crore (USD 100 billion) by 2025 as companies are expanding globally. IT companies face short-term softness due to slower spending by global clients, yet the long horizon still looks promising. Firms in consulting, cloud support, automation and software services continue to see interest from global and local clients.

• Consumption-Based Sectors

Retail, FMCG and consumer discretionary segments have benefited from increased incomes, urban demand and a declining inflation. Firms in the apparel, packed goods, restaurants and home appliances will also get benefits because people will end up spending more on non-essential products.

3. Macroeconomic Stability and Outlook

A stable outlook is indicated by research conducted by Deloitte. The rates of inflation have been lowered, the interest rates are favourable, and the financial flow is stable.

This is a stabilising backdrop of smooth growth and reduced risks to investors and businesses. The consumption-related sectors of the economy, like infrastructure and technology, seem to be doing well in this wave.

Indian Stock Market in 2025

India’s stock markets were volatile in 2025, and both global and local problems are behind this slow performance. The tariff battle started by US President Donald Trump has created instability across world markets, and India is feeling that pressure too. But it’s not just global issues. 

The confidence has dropped, and FIIs have pulled out a record amount of money from Indian equities this year. This steady outflow has weighed heavily on market sentiment and kept returns muted.

The slowdown in 2025 becomes clearer when we compare index returns from November 2024 to November 2025:

Performance till Nov 2025 (1-year returns):

• Nifty 50: 5%
• Nifty 100: 3%
• Nifty Midcap 150: 3%
• Nifty Smallcap 250: -5%

The broad rally of 2024 lost steam in 2025.

• Midcaps and small caps, once the top performers, barely grew or even slipped into negative territory.
• Large caps held up slightly better, but gains were still modest.
• High valuations and global tariff uncertainty played a major role in cooling enthusiasm.
• Foreign investors pulling out money added extra pressure across market segments.

India’s Q2 GDP Expected to Exceed 7.5% on Festive Demand and GST Rate Cuts

India’s GDP growth has improved consumption indicators across agriculture, industry, and services, with 83% of demand-linked indicators showing acceleration, up from 70% in Q1. The Reserve Bank of India had earlier projected 7% GDP growth, but SBI’s model nowcasts a higher figure with room for an upside surprise.

SBI also reported that GST collections of November 2025 to reach ₹2 lakh crore with the boost of festivals and booming credit/debit card purchases. The rural areas and mid-tier cities are recording the highest growth.

Although the world is exposed to volatility of global commodities, SBI observes that India has a strong and stable economic situation in the near run, which will sustain the growth in the medium term.

Conclusion 

Increase in household expenditure, employment generation, declining inflation and increased investment have been driving India’s economy.

Positive developments in markets can also be seen with better prospects coming in banking, manufacturing and consumption-linked segments. Public capital spending added further support.