India is set to remain the world’s fastest-growing major economy in 2025-26, with GDP growth projected at 6.5-6.7%. The RBI bulletin highlights fiscal consolidation, rising Capex, and improving economic momentum.
India Poised to Stay World’s Fastest Growing Economy in 2025-26: RBI Bulletin
India’s economy is on track to maintain its position as the fastest-growing major economy in 2025-26, according to the latest RBI bulletin. With GDP growth projected at 6.5% by the IMF and 6.7% by the World Bank, India is demonstrating resilience amid global uncertainties. The bulletin highlights key trends such as improving economic momentum, increased capital expenditure, stable private sector investments, and moderated retail inflation.
India’s Economic Growth: Key Projections for 2025-26
The RBI bulletin confirms that India’s economy is recovering from a temporary loss of momentum in the first half of 2024-25. The second half of the fiscal year shows:
- A sequential pick-up in economic activity driven by industrial production and consumer demand.
- Growth estimates by the IMF (6.5%) and World Bank (6.7%) reinforce India’s leading position among major economies.
- The effective capital expenditure-to-GDP ratio is projected to improve from 4.1% in 2024-25 to 4.3% in 2025-26, reflecting a strong push for infrastructure development.
Capital Expenditure and Fiscal Policy
The Union Budget for 2025-26 strategically balances fiscal consolidation and growth:
- Increased public investment: The government continues its focus on infrastructure, manufacturing, and digital transformation.
- Private sector participation: Bank and financial institution-backed projects worth ₹1 lakh crore were sanctioned in Q3:2024-25.
- Higher external commercial borrowings (ECBs) and IPOs indicate greater confidence in the investment climate.
Retail Inflation Moderation
Inflationary pressures are easing, with retail inflation falling to a five-month low of 4.3% in January 2025. This is mainly due to:
- A sharp decline in vegetable prices, helped by an improved winter crop harvest.
- Stable energy prices and supply chain improvements, which have reduced input costs across industries.
Sector-Wise Economic Performance
1. Industrial Activity
- The Purchasing Managers’ Index (PMI) in January 2025 indicates a rebound in manufacturing output.
- Factory production and exports are improving, showing strong demand domestically and globally.
2. Rural Demand and Agriculture Growth
- Rural demand remains strong, supported by higher farm incomes.
- Sales of Fast-Moving Consumer Goods (FMCG) grew 9.9% in Q3:2024-25, compared to 5.7% in Q2.
- Tractor sales and fuel consumption have increased, indicating greater economic activity in rural areas.
3. Urban Demand Recovery
- Urban demand grew 5% in Q3, nearly double the 2.6% growth recorded in the previous quarter.
- Air passenger traffic remains high, reflecting increased mobility and consumer spending.
Corporate and Private Sector Growth
- Listed non-government, non-financial companies reported stronger sales growth in Q3:2024-25.
- Operating profit margins improved due to higher revenues and better cost management.
- Private sector investments remain stable, with an increase in project financing from banks and financial institutions.
Impact of Global Trade and Geopolitical Uncertainty
1. Global Trade Shifts
- The RBI bulletin warns that trade policy uncertainties in the US could impact global trade patterns.
- The US-China trade war’s resurgence and trade restrictions could lead to higher costs for businesses and consumers worldwide.
2. Currency Markets and Foreign Investment
- The INR has depreciated in line with other emerging market currencies due to the strong US dollar.
- Foreign Portfolio Investors (FPIs) withdrew capital, causing temporary fluctuations in the stock market.
- Despite this, India’s strong macroeconomic fundamentals have helped it navigate global volatility.
Key Takeaways for Ind Economy in 2025-26
- India remains the fastest-growing major economy, with GDP projected to grow by 6.5-6.7%.
- Capital expenditure continues to rise, supporting long-term infrastructure and industrial growth.
- Retail inflation has moderated, improving purchasing power and economic stability.
- Rural and urban demand are recovering, driven by higher farm incomes and increased consumer spending.
- Private sector investments remain steady, signaling confidence in the economy.
- India’s macroeconomic resilience helps it manage external challenges like global trade tensions and currency fluctuations.
FAQs
1. What is India’s projected GDP growth for 2025-26?
India’s GDP is expected to grow by 6.5% (IMF estimate) and 6.7% (World Bank estimate), making it the world’s fastest-growing major economy.
2. How has retail inflation changed in early 2025?
Retail inflation fell to 4.3% in January 2025, its lowest in five months, due to a sharp decline in vegetable prices and stable energy costs.
3. What factors are driving economic growth in India?
Key drivers include higher capital expenditure, strong rural demand, rising private investments, and industrial growth.
4. How is India’s private sector performing?
Listed companies have reported higher sales and improved profit margins. The private sector continues to invest, with ₹1 lakh crore worth of projects sanctioned in Q3:2024-25.
5. How is India dealing with global trade uncertainty?
India’s strong macroeconomic fundamentals and external sector stability have helped it navigate global trade risks, including US-China trade tensions and FPI outflows.
6. What is the impact of the strong US dollar on India?
The Indian rupee has depreciated, similar to other emerging market currencies. However, India’s stable economy and growing investments have mitigated major risks.
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India is poised to remain the world’s fastest-growing major economy in 2025-26, driven by strong capital expenditure, robust demand, and private sector confidence. Despite global uncertainties, India’s macroeconomic resilience positions it as a leading global growth engine.