Recession Risk 2025: A State-by-State Look at India’s Economic Stability at Year-End

Rank	Region Name	Recession Risk (%)
1	Kerala	28
2	Haryana	25
3	Jammu and Kashmir	24
4	Punjab	23
5	Goa	22
6	Delhi	21
7	Rajasthan	20
8	Bihar	19
9	Jharkhand	18
10	Tripura	17
11	Himachal Pradesh	16
12	Lakshadweep	15
13	Andaman and Nicobar Islands	14
14	Sikkim	13
15	Meghalaya	12
16	Nagaland	11
17	Manipur	10
18	Mizoram	9
19	Arunachal Pradesh	8
20	Assam	7
21	Odisha	6
22	West Bengal	6
23	Chhattisgarh	5
24	Uttar Pradesh	5
25	Madhya Pradesh	4
26	Puducherry	4
27	Uttarakhand	3
28	Telangana	3
29	Andhra Pradesh	3
30	Karnataka	2
31	Tamil Nadu	2
32	Gujarat	2
33	Maharashtra	1
34	Chandigarh	1
35	DNHDD	1
36	Ladakh	1

India is expected to experience a low overall risk of recession in 2025. Analysts forecast national GDP growth rates ranging from 6.3% to 6.8%, fueled by strong domestic demand and government investment in infrastructure.

While global uncertainties such as US tariffs and possible economic slowdowns present challenges, India’s economy demonstrates notable resilience.

The table illustrates clear regional disparities, with southern and western states facing lower risks thanks to their diversified industries and strong growth.

In contrast, northern and northeastern regions are more vulnerable due to their reliance on agriculture, high unemployment rates, and fiscal challenges.

This analysis delves into these differences and the factors that contribute to them.

Regional Variations in Recession Risk

The table categorizes Indian states and union territories based on their projected recession risk percentages for 2025.

Nationally, risks remain low, peaking at 28% in Kerala and dipping to 1% in industrialized regions such as Maharashtra. States with diversified economies, including Gujarat, Tamil Nadu, and Karnataka, maintain risks below 3%.

These areas excel in manufacturing, IT services, and exports, providing a buffer against economic shocks.

Maharashtra stands out with significant contributions from the finance and entertainment sectors, indicating a forecast of steady growth.

Factors Driving Higher Risks

Increased risks are primarily found in states like Kerala, Haryana, and Punjab. Kerala’s risk level reaches 28%, primarily due to high youth unemployment rates, which often exceed 30%, coupled with a heavy dependence on remittances.

The global economic slowdown affects migrant workers abroad, leading to reduced remittance inflows and decreased consumption. Haryana and Punjab face challenges related to agricultural distress and skill mismatches, resulting in unemployment rates that surpass national averages.

These issues heighten vulnerabilities, particularly if external demand diminishes.

Moderate risks of 7% to 19% are observed in the Northeastern states and Bihar. Limited industrial development, inadequate infrastructure, and geographical challenges impede growth.

Assam and Odisha rely heavily on agriculture and mining, making them susceptible to fluctuations in commodity prices and weather conditions.

Additionally, fiscal deficits in several northern states exacerbate the situation, limiting the ability to implement stimulus measures during economic downturns.

Resilience in Low-Risk States

Southern regions such as Tamil Nadu, Karnataka, and Telangana exhibit notable resilience.

The IT industries in Bengaluru and Hyderabad, along with manufacturing in Chennai, drive job creation and spur innovation. Andhra Pradesh reaps the benefits of investments in ports and industry, forecasting a growth rate exceeding 8%.

These states are appealing to foreign direct investment (FDI) and have improved ease of doing business rankings, which encourages private sector investment.

In the west, states like Gujarat and Maharashtra thrive due to their ports, petrochemical industries, and service sectors.

Government programs such as Production Linked Incentives bolster the competitiveness of manufacturing.

Uttar Pradesh stands out with a lower risk level of 5%, attributed to infrastructure developments and demographic advantages that are translating into increased consumption growth.

Wider Economic Landscape

National projections indicate that India is somewhat insulated from the threats of a global recession.

Domestic consumption constitutes more than 60% of the GDP, providing a buffer against declines in exports. The Reserve Bank of India’s interest rate reductions and government fiscal measures enhance demand.

However, states burdened with high levels of debt or unemployment remain vulnerable, particularly if inflation escalates or monsoon seasons are unsuccessful.

The concept of diversification accounts for a significant portion of the observed differences.

States reliant on agriculture experience fluctuations due to climate conditions and market prices, whereas those driven by services tend to maintain stability.

Unemployment statistics show that educated young individuals in Kerala and Haryana face challenges in finding suitable job matches, in contrast to the skill-aligned opportunities available in the technology hubs of the south.

Forecasts take into account trends for 2024-25, which include unemployment data from the Periodic Labour Force Survey (PLFS) and growth in state Gross State Domestic Product (GSDP).

States like Tamil Nadu, which are growing at rates exceeding 11%, are unlikely to experience significant contractions. Conversely, slower-growing states may face stagnation if they encounter economic shocks.

Policymakers are focusing on regions that are at risk through the implementation of skill development programs and targeted investments.

Initiatives such as PM SVANidhi and employment incentives are designed to support informal sectors in areas that are considered high-risk.

Source

• Deloitte. (2025). India economic outlook, October 2025. https://www.deloitte.com/us/en/insights/topics/economy/asia-pacific/india-economic-outlook.html
• Morgan Stanley. (2025). India equity strategy report.