India’s Q1 GDP Likely Grew 6.7% on Rural Rebound, Urban Demand Still Weak

India’s economic growth likely accelerated to 6.7% in Q1 2025, up from 6.2% the previous quarter, driven largely by a pickup in rural consumption amid better agricultural output and easing inflation, according to a Reuters poll of 56 economists conducted May 19–23. Growth estimates ranged from 5.8% to 7.5%.

Economists noted improved crop production and moderating inflation boosted rural demand, while urban consumption remained subdued. “We’re seeing signs of a rural rebound, supported by improved crop output,” said Gaura Sengupta, chief economist at IDFC First Bank. Citi analysts echoed this, noting strong agricultural activity, but remained cautious on urban spending without more policy stimulus.

Gross value added (GVA), a more stable measure excluding taxes and subsidies, rose 6.4% year-on-year in Q1, slightly above last quarter’s 6.2%. However, economists caution this apparent recovery may be more statistical than structural. Standard Chartered’s Anubhuti Sahay attributed the growth uptick largely to lower subsidy payouts, boosting net indirect taxes.

Societe Generale’s Kunal Kundu warned real rural wages remain stagnant and not yet strong enough to meaningfully drive growth. Urban demand also shows little sign of recovery. Without stronger domestic consumption, growth will continue to lean heavily on government spending.

Meanwhile, uncertainty in global trade—particularly U.S. tariff policy—is hurting business confidence and delaying private investment. “Interest rate cuts alone won’t spur investment unless global sentiment stabilizes,” said Indranil Pan, chief economist at Yes Bank.

The Reserve Bank of India is expected to cut rates again in June, but economists say sustained recovery requires broader demand revival and improved investor sentiment amid global uncertainty.