India’s GDP To Surpass $4 Tn In 2025 Amid Global Challenges: PHDCCI

Amid the Q2 slowdown in the gross domestic product (GDP) growth, India’s growth story continues with GDP surpassing USD 4 trillion in 2025 and becoming the fourth largest economy by 2026, supported by robust economic fundamentals and a dynamic business environment, industry body PHD Chamber of Commerce and Industry (PHDCCI) has said.

An analysis conducted by the PHD Research Bureau, PHD Chamber of Commerce and Industry in a report on “New Year Economics PHDCCI Economic Outlook 2025” projects that India will be the most resilient economy among the top ten leading economies in the next three years (2025-2027).

However, Kristalina Georgieva, the Managing Director of the International Monetary Fund (IMF) recently stated that the Indian economy is expected to be a little weaker in 2025. The IMF MD said that while the global growth is likely to be steady, regional divergence is also expected.

The data released by the Ministry of Statistics also revealed that India’s GDP growth for the financial year 2024-25 (FY25) is projected at 6.4 per cent, a significant dip from the 8.2 per cent recorded in FY24. This marks the first time in four years that growth has fallen below the 7 per cent mark, driven by a sluggish first half marked by high inflation, reduced fiscal stimulus, and tighter lending norms.

PHDCCI’s report added that the five major economic indicators highlight the overall strength of the economy, including GDP performance, the robustness of the external sector as indicated by export trends, structural indicators of saving and investment, and the fiscal consolidation efforts represented by the debt-to-GDP ratio.

“With the Indian economy growing resiliently over the past three years, the economy is expected to become the fourth largest economy in the World by 2026, surpassing Japan, said Hemant Jain, President, PHDCCI.

Resilient Economy Amid Geopolitical Challenges
The industry body also stated that India’s economy remains resilient despite a subdued global economic outlook and persistent geopolitical challenges. Geopolitical conflicts generate spillover effects, extending beyond borders, affecting international trade, global value chains, and financial markets, thus reshaping the World’s demand and supply dynamics.

Amid this challenging external landscape, India’s geopolitical significance is growing significantly, earning appreciation from international institutions, said Jain. He added, “India is making significant strides in its futuristic growth trajectory, the GDP in the current financial year (2024-25) is expected to expand at 6.8 per cent and 7.7 per cent in FY2025-26.”

The analysis stated that India emerges as the leader in export growth among the top ten economies, for the futuristic outlook (2025-2027), improving from its second rank in past performance (2022-2024), supporting India’s ambitious target of USD 2 trillion exports by 2030.

India’s merchandise exports declined by 4.83 per cent in November 2024, reaching a 25-month low of USD 32.11 billion, while the import bill rose 27 per cent to a new record high of nearly USD 70 billion, significantly surpassing October’s previous record of USD 66.34 billion.

The trade deficit hit an all-time high of USD 37.84 billion, a 77.5 per cent increase compared to November 2023, according to data from the Ministry of Commerce and Industry. This marks the third instance in four months that India’s import bill reached a record high, with the trade deficit also climbing sharply. In August, imports had reached a then-record of USD 64.34 billion.

In today’s uncertain global landscape, with geopolitical tensions and shifting trade dynamics, India needs a proactive trade strategy. Diversifying our export markets and products is key to weathering global shocks. We must actively explore new markets, especially in emerging economies, and promote value-added exports,” Vikas Singh, Senior Economist and Author told BW Businessworld.

Singh added that enhancing the competitiveness of Indian exports is also crucial. This means reducing logistics costs through better infrastructure, streamlining customs, and supporting technology adoption, particularly for micro, small and medium enterprises (MSMEs). 

Momentum In Investments
PHDCCI report also stated that the country is anticipated to maintain a continuous momentum in investments and savings, at around 33 per cent and 32 per cent of GDP respectively, highlighting the government’s commitment to fostering a favourable investment environment and a greater investor-friendly ecosystem for businesses.

According to the industry body, India ranks second among the top 10 economies in the past performance (2022-2024) and in the futuristic outlook (2025-2027) for savings and investments. It established a milestone in its Foreign direct investment (FDI) journey in 2024 as cumulative (2000-2024) FDI inflows touched USD 1 trillion and exceeded USD 40 billion in the first half of the current financial year (2024-2025).

Notably, nearly 70 per cent of this cumulative FDI has been accumulated in the recent decade, facilitated by government proactive policy initiatives and liberalised FDI guidelines, said the industry body PHDCCI. FDI inflows into India have surpassed the $1 trillion mark during the April 2000 to September 2024 period, reinforcing the country’s position as a prominent and reliable global investment destination.

As per data from the Department for Promotion of Industry and Internal Trade (DPIIT), the total FDI, including equity, reinvested earnings, and other capital, amounted to USD 1,033.40 billion in this period. However, according to a report by the State Bank of India (SBI), India could see a shift in FDI trends in the second term of Donald Trump (Trump 2.0) as President of the United States (US).

The report highlighted that under his first term Trump 1.0, he made sweeping regulatory changes aimed at attracting investments back to America., which impacted FDI inflows globally including India. It added that if similar policies are reintroduced in Trump 2.0 also, it could create challenges for emerging markets like India, which rely on FDI as a significant driver of economic growth.

“India may see shifts in foreign direct investments (FDIs) during Trump 2.0. The Trump 1.0 administration saw significant regulatory changes aimed at attracting investments back to the US,” the report stated. However, the report also noted that India has been gradually diversifying its sources of FDI, and this trend could serve as a buffer against any potential decline.

Ranjeet Mehta, Chief Executive Officer (CEO) and Secretary General, PHDCCI said, “India’s growth is attributed to deeper integration into global supply chains, a dynamic innovation ecosystem and improved export competitiveness, while the government’s efforts to rationalize expenditures and revenues aid in fiscal consolidation. This stands in contrast to many economies grappling with low growth and high debt levels.”

Meanwhile, the industry body added that the inflation trajectory is expected to be around 4.5 per cent (average) for the current financial year and 4 per cent (average) for the next financial year (2025-26). It has identified five growth-promising sectors, including agriculture and food processing, fintech, semiconductors, health and insurance, and renewable energy, to lead India’s growth trajectory to higher growth in the coming years.