India expects strong economic growth despite US tariff hit

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India's GDP growth expected to surpass initial forecasts, driven by government spending

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Modi's reforms counter U.S. tariffs, boost economic resilience

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Private consumption and investment to show strong year-on-year growth, stats office says

By Shivangi Acharya and Nikunj Ohri

NEW DELHI, Jan 7 (Reuters) - India's economic growth is estimated to surge past most initial private and official forecasts, ?backed by robust domestic demand and government spending, helping New Delhi cope with punitive U.S. tariffs. The near $4 trillion economy is expected to ?grow 7.4% in the fiscal year ending in March, the National Statistics Office said on Wednesday, ?above the government's initial projection of 6.3%-6.8%.

Indian Prime Minister Narendra Modi, facing ?steep U.S. tariffs and an ?uncertain global backdrop, last year accelerated domestic reforms to support growth, including an overhaul of consumer taxes on hundreds of items and ?implementation of long-delayed labour reforms.

"(This growth) reflects that despite ?rising global uncertainties India continued to perform well," Sakshi Gupta, economist at HDFC Bank, said.

The estimate of gross domestic product, which will be revised over time as data ?coverage improves, will be used as a base for ?the federal ?budget due to be announced on February 1. The Indian economy grew 6.5% in 2024/25 and 9.2% in 2023/24.

India has edged past Japan to become the world's fourth-largest economy, the ?government said last month. Confirmation by the International Monetary Fund is due.

In nominal terms, which factor in inflation, the economy is expected to grow 8%, compared with the 10.1% estimate in the annual federal budget announced last February.

Private consumption, which accounts for about 60% of GDP, was seen expanding by 7% year-on-year compared to a 7.2% expansion last fiscal year.

Government spending is estimated to rise ?by 5.2% year-on-year ?in 2025/26, up from a 2.3% increase the previous year, while private investment is seen rising by 7.8%, higher than the 7.1% growth the year before.

The United States has ?imposed 50% tariffs on some of India's key exports to punish it for its purchases of Russian oil.

However, the strong growth estimate is possibly due to a limited hit on India's exports so far, helping steady manufacturing growth, said Madhavi Arora, economist at Emkay Global.

Manufacturing, which accounts for about 13% of GDP, is projected to expand 7% year-on-year in 2025/26, compared with 4.5% a year ago, while construction output was seen growing by 7%, down ?from 9.4% in the previous year, data showed.

The output of farms, which employ more than 40% of India's workforce, was estimated to expand 3.1% in the current fiscal year from 4.6% a year ago.

(Reporting by Shivangi Acharya and Nikunj Ohri; ?Additional reporting by Hritam Mukherjee; Graphics by Vineet Sachdev; Editing by Hugh Lawson, Mrigank Dhaniwala and Toby Chopra)