India's Economic Surge: Foreign Investments, Forex Reserves, and Job Market Thrive Despite Headwinds

India's economy saw robust growth with 7.5% rise in investments and a 52.4% surge in FDI inflows in Q1 FY25. Forex reserves reached a record $684 billion. GST collections and formal job creation signal vigorous economic activity. Real GDP grew 6.7%, highlighting strong non-agricultural sector performance.

Investment in India surged by 7.5% in the April-June quarter, suggesting a strengthening private investment cycle, the Ministry of Finance's monthly economic review noted. Notably, Net Foreign Direct Investment (FDI) inflows skyrocketed by 52.4% during the first four months of FY25, driven by a 23.7% increase in gross FDI inflows, from $22.4 billion in FY24 to $27.7 billion in the same period of FY25.

More than three-fourths of these FDI inflows were captured by sectors such as manufacturing, financial services, communication services, computer services, and energy. By August 30, 2024, India's foreign exchange reserves peaked at $684 billion, marking an increase of $64 billion from January to August 2024—the highest percentage increase among major forex reserves-holding nations.

India's forex reserves are sufficient to cover over 11 months of imports and 100% of its external debt as of March 2024. Rising exports and stable foreign capital inflows illustrate the strength of India's external sector. Foreign portfolio investors continued to buy into the market during April-August 2024, driven by stable capital inflows, which propelled forex reserves to historic levels.

In August, GST collections grossed Rs 1.74 lakh crore, reflecting a 10% annual increase. Cumulatively for 2024, GST collections soared 10.1% to Rs 9.13 lakh crore, up from Rs 8.29 lakh crore in the respective period of 2023. Indicators like rising GST collections, active purchasing managers' indices, and increased cargo activity point to dynamic economic growth.

Labour market data reflect a promising future for the next quarter. EPFO added 10.5 lakh new members in July 2024, with 59.4% of them aged 18-25, highlighting a boost in the organized workforce and youth employment. The report anticipates a rise in public expenditure for the remainder of the fiscal year, likely providing an additional boost to growth and investment.

India's real GDP grew by 6.7% during the April-June quarter of 2024-25, down from 8.2% in the same quarter last year. Weaker government expenditure ahead of the general elections and an extended heatwave impacted the growth. However, major non-agricultural sectors grew above 5%, suggesting widespread economic expansion. The advancing monsoon also boosted kharif sowing, improving agricultural production prospects.

Over the financial year 2023-24, India's GDP grew impressively by 8.2%, maintaining its status as the fastest-growing major economy. The economy registered 7.2% growth in 2022-23 and 8.7% in 2021-22.

(With inputs from agencies.)