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Economic Growth Outlook
According to the latest Reserve Bank of India (RBI) bulletin, India is set to maintain its position as the world's fastest-growing major economy in 2025-26. The report highlights that economic activity in the country has picked up significantly in the second half of 2024-25, and this momentum is expected to continue.
GDP Growth Projections & Budget Impact
Despite global economic uncertainties, India's GDP growth remains strong. The International Monetary Fund (IMF) and the World Bank have projected growth rates of 6.5% and 6.7%, respectively.
The Union Budget 2025-26 prioritizes domestic consumption, income growth, and capital expenditure. A key focus has been increasing the capital expenditure-to-GDP ratio from 4.1% to 4.3%, aiming to drive long-term economic growth.
Retail Inflation & Rising Demand
Retail inflation dropped to 4.3% in January, reaching its lowest level in five months. This decline is mainly due to falling vegetable prices.
Consumer demand has improved in both rural and urban areas. Higher agricultural income has boosted rural demand, leading to a 9.9% increase in FMCG sales in rural markets during the third quarter, compared to 5.7% in the previous quarter. Urban demand also grew by 5%, indicating an overall economic recovery.
Growth in Industrial Activities & Investments
Industrial activity has strengthened, as indicated by the Purchasing Managers’ Index (PMI). Key economic indicators such as tractor sales, fuel consumption, and air passenger numbers have also increased, signaling a strong economic outlook.
Private Investment & Market Trends
Private investment remains steady, with banks and financial institutions approving projects worth ₹1 lakh crore in the third quarter of the current financial year.
However, uncertainty in global trade and geopolitical tensions have led to foreign portfolio investor (FPI) outflows, causing volatility in the Indian stock market. The strength of the US dollar has also weakened the Indian rupee, in line with other emerging market currencies.
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