Moodys Projects 7% GDP Growth for India in 2025, Fastest Among Emerging Markets

India is poised to remain the fastest-growing major emerging market in 2025, with GDP expected to rise by 7%, according to the latest forecast released by global rating agency Moody’s Investor Service. The report highlights that India’s strong domestic demand, fiscal reforms, and improving investment climate will place it at the forefront of emerging market growth next year.

Moody’s noted that despite global economic headwinds including geopolitical tensions, elevated inflation in advanced economies, and a slowdown in China’s recovery India’s economic fundamentals remain resilient. The agency emphasized that India’s expanding manufacturing base, digital transformation initiatives, and stable financial sector have helped cushion the economy from external shocks.

The forecast comes at a time when several emerging markets face pressures from high borrowing costs and currency volatility. In contrast, India’s controlled inflation levels, robust government capital expenditure, and rising private investment are projected to drive growth momentum. “India’s structural reforms and macroeconomic stability continue to support its medium-term growth prospects,” Moody’s said in the report.

A key driver of the projected 7% growth is expected to be strong domestic consumption, particularly in urban centers where rising incomes and increased job creation are boosting demand. Moody’s also pointed to improvements in rural consumption, supported by better agricultural output and targeted welfare schemes.

The report further highlighted the role of India’s ambitious infrastructure push. Massive ongoing investments in transportation, logistics, energy, and digital infrastructure have created a pipeline of opportunities for both domestic and foreign investors. These infrastructure projects are expected to elevate productivity, lower logistics costs, and improve the overall ease of doing business.

The manufacturing sector, buoyed by initiatives such as Production-Linked Incentive (PLI) schemes, is also expected to contribute significantly. Moody’s observed that multinational companies looking to diversify their supply chains away from China continue to view India as an attractive alternative, resulting in increased foreign direct investment flows.

However, the rating agency cautioned that risks remain. Global oil price fluctuations could strain India’s import bill, while weather-related disruptions may impact agricultural output. Additionally, sustaining high levels of investment will require continued policy consistency, fiscal discipline, and progress on labour and land reforms.

Despite these challenges, Moody’s maintained a positive outlook, stating that India’s growth trajectory is set to outpace other emerging markets by a significant margin. In comparison, most emerging economies are expected to see GDP growth between 2% and 4% in 2025, underscoring India’s relative economic strength.

The report also highlighted India’s growing role in the global economy. With a young population, expanding digital ecosystem, and rising global competitiveness, India is increasingly viewed as a key engine of world economic growth. “India’s demographic and economic scale provides it with a unique advantage among emerging markets,” the agency noted.

As India heads into 2025, policymakers are expected to continue focusing on reforms, infrastructure development, and employment generation to sustain high growth levels. With Moody’s projecting a strong year ahead, India appears positioned to build on its momentum and reinforce its status as the world’s fastest-growing major economy.