India has more recently developed as a new favorite for many Western politicians and corporations. Even more when growth expectations were exceeded also in the final quarter of 2025, 7.8 percent compared to 7.2 that were expected. The outlook remains relatively favorable due to probable good resilience against ongoing exogenous distortions.<\/p>\n\n\n\n
Where does GDP growth come from?<\/strong><\/p>\n\n\n\n Obviously, India Is now receiving growing attention by analysts around the whole world. Good numerical GDP growth in India and China\u2019s simultaneously somewhat distorted reputation in global media may serve as logical explanations. More lately, some interesting Indian developments could be observed.<\/p>\n\n\n\n First<\/em>, it should be mentioned that GDP growth has been boosted by a technical revision, i.e. moving the base year from FY 2012 to FY 2023 (which in India is defined as a time horizon from April 1 to March 31). This structural revision means a stronger contribution to GDP from the modern technological part of the Indian economy compared to calculations from 20 years earlier. The revision took place after the IMF\u2019s prompt to modernize the national account and looks as follows:<\/p>\n\n\n\n FY 2024 7.2 (new series) 9.2 (old series)<\/p>\n\n\n\n FY 2025 7.1 (new series) 6.5 (old series)<\/p>\n\n\n\n FY 2026 7.6 (new series) 7.4 (old series)<\/p>\n\n\n\n Second, <\/em>both private consumption and gross investments are reported having grown by more than 7 percent in Q4. When considering that private consumption counts for 75 percent of Indian GDP and the slightly negative trend for net exports, the Indian investment ratio to GDP remains somewhat too low for a rapidly emerging country.<\/p>\n\n\n\n Third, <\/em>GDP growth for Q2 got also a technical upward revision, from previously 8.2 to 8.4. Indian media report now proudly that India now has the fasted growing economy among the major countries.<\/p>\n\n\n\n Fourth, <\/em>when watching more recent developments from the production side, technological progress seems indeed being an increasingly important driving force for manufacturing industries. Strong concentration on AI and telecommunication take also place in industrial production, increasingly also with foreign companies.<\/p>\n\n\n\n Fifth, <\/em>Maharashtra is expected to be India\u2019s wealthiest state also in FY2026 due to its diversified production structure with mainly manufacturing, services and infrastructure. Thus, GDP growth there should surpass national average. Mumbai, Pune and Nagpur stand for half of Maharashtra\u2019s GDP and for around one fifth of India\u2019s population.<\/p>\n\n\n\n Despite the promising outlook \u2013 don\u2019t forget still existing risks!<\/strong><\/p>\n\n\n\n When (financial) markets are favoring a certain (emerging) country, the remaining weaknesses and risks are often \u201cforgotten\u201d. This has, for example, been the case concerning China In almost the whole first quarter of this century. And even the future development of India\u2019s economy is not without risks \u2013 despite all the opportunities.<\/p>\n\n\n\n Short-term risks<\/em> that should be mentioned are, for example, the ongoing war in the Middle East with its impact on energy supply and inflation, American protectionism, negative developments of remittance flows from abroad and, consequently, on the balance of current account. <\/p>\n\n\n\n Among the long-term (structural ) risks<\/em> one can find particularly weak public finance and infrastructure, very uneven distribution of income, energy and environmental problems, bureaucracy, only slow improvements of private investment and productivity in major parts of the economy and the \u2013 in my understanding – still improvable business climate.<\/p>\n\n\n\n Very different psychology in India and Germany<\/strong><\/p>\n\n\n\n Since I deal quite a lot with the economy of both countries, a striking psychological distinction between the two countries may be mentioned. This distinction could be described as follows:<\/p>\n\n\n\n \u00a4 Germans <\/em>see and discuss more frequently problems in the economy, having in difficult times rather a very skeptical or pessimistic view (which even can have a negative impact on economic growth via too reluctant consumers and investors).<\/p>\n\n\n\n \u00a4 Indians<\/em> on the other hand dislike normally to sound negative \u2013 at least when they are discussing the development of their country with foreigners. This may be a preferable psychological attitude compared to German skepticism but should be considered with some caution by foreign companies when planning activities in the promising \u2013 but to some extent still vulnerable \u2013 Indian market.<\/p>\n","protected":false},"excerpt":{"rendered":" India has more recently developed as a new favorite for many Western politicians and corporations. Even more when growth expectations were exceeded also in the final quarter of 2025, 7.8 percent compared to 7.2 that were expected. The outlook remains relatively favorable due to probable good resilience against ongoing exogenous distortions. Where does GDP growth […]<\/p>\n","protected":false},"author":126,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10503,13622],"tags":[],"class_list":["post-3766","post","type-post","status-publish","format-standard","hentry","category-other-emerging-markets","category-india"],"acf":[],"yoast_head":"\r\n