India’s economic growth quickened in the December quarter of FY25 to 6.2% from a revised seven-quarter low of 5.6% in the September quarter, the second advance estimates released by the government on Friday showed.

Gross domestic product (GDP) growth in the past quarter was aided by rural consumption following bountiful rains during monsoon and higher government spending during the quarter.

The faster growth during the third quarter helped the government retain its full-year GDP growth forecast of 6.5%, still a four-year low.

Economic growth had declined to a near two-year low of 5.6% in the September quarter, with the government forecasting full-fiscal growth of 6.4% in its first advance estimate.

Meanwhile, the government revised its growth data for both FY24 and FY23.

Economic growth for FY24 was revised upward to 9.2% from 8.2% in the earlier provisional estimate released in May 2024.

Growth in FY23 has also been revised upwards to 7.6% from the earlier estimate of 7%.

The government’s updated numbers for FY23 and FY24 signal that the growth slump in FY25 is sharper than earlier expected.

Data indicate that agriculture and the services sector helped growth pick up in the December quarter.

Farm growth in the December quarter, pegged at 5.6%, was higher than the 4.1% recorded in the previous quarter and at a six-quarter high, data showed.

Services sector grew at a faster pace of 7.4% when compared with 7.2% in the previous quarter.

Manufacturing growth picked up slightly to 3.5% from 2.1% in the previous quarter , while construction growth declined to 7% from 8.7% in the previous quarter.

India needs to grow 7.8% for 22 years to become developed: WB

Meanwhile, in a report released just before India released its second advance growth estimate, the World Bank said the country will need to grow by 7.8% on average over the next 22 years to achieve the country’s aspirations of reaching high-income status by 2047.

Recognizing India’s fast pace of growth averaging 6.3% between 2000 and 2024, the report notes that India’s past achievements provide the foundation for its future ambitions. Getting there however would require reforms and their implementation to be as ambitious as the target itself.

The new India Country Economic Memorandum titled ‘Becoming a High-Income Economy in a Generation,’ finds that this target is possible.

“Lessons from countries like Chile, Korea and Poland show how they have successfully made the transition from middle- to high-income countries by deepening their integration into the global economy,” said Auguste Tano Kouamé, World Bank Country Director. “India can chart its own path by stepping up the pace of reforms and building on its past achievements.”

The report evaluates three scenarios for India’s growth trajectory over the next 22 years.

The scenario which enables India to reach high-income status in a generation, requires India to: a) achieving faster and inclusive growth across states; b) increasing total investment from current 33.5% of GDP to 40% (both in real terms) by 2035; c) increasing overall labor force participation from 56.4% to above 65%; and d) accelerating overall productivity growth.

“India can take advantage of its demographic dividend by investing in human capital, creating enabling conditions for more and better jobs and raising female labor force participation rates from 35.6% to 50% by 2047,” said Emilia Skrok and Rangeet Ghosh, co-authors of the report. 

In the past three fiscal years India has accelerated its average growth rate to 7.2%.

To achieve a 7.8% growth rate over the next two decades, the Country Economic Memorandum outlines four key policy areas:

Increase investment: Raise the investment rate from 33.5% to 40% of GDP by 2035 through enhanced financial regulations, easing MSME credit, and simplifying FDI policies.

Job creation: Boost labor force participation by incentivizing private investment in labor-intensive sectors like agro-processing, hospitality, and transportation.

Promote structural changes: Shift resources from agriculture to higher productivity sectors like manufacturing and services, streamline regulations, and adopt modern technologies to enhance competitiveness and global value chain integration.

State-level growth: Implement differentiated policies where less developed states focus on basic growth fundamentals and more developed states advance reforms. Enhance state capabilities and incentives through programs like the urban challenge fund to accelerate development in lagging areas.