India Posts Rare High-Growth, Low-Inflation Phase In 2025: Govt Assessment

New Delhi, Dec 30 (KNN) India entered a rare phase of high growth combined with low inflation in 2025, with economic indicators pointing to strengthening momentum across output, jobs, prices, and trade, according to a government assessment released on Sunday.

GDP Growth and Inflation

India’s real GDP growth rose to 8.2 percent in Q2 FY26, up from 7.8 percent in Q1 and 7.4 percent in Q4 FY25, marking a six-quarter high. Strong domestic consumption drove the expansion, with gross value added growing 8.1 percent, led by industry and services.

Inflation eased sharply in FY26, creating a ‘goldilocks period’ of strong growth with price stability. 

Headline consumer price index (CPI) fell from 4.26 percent in January to 0.25 percent in October, before rising slightly to 0.71 percent in November. Wholesale price index (WPI) dropped to negative 0.32 percent in November from 2.31 percent at the start of the year.

In response, the Reserve Bank of India (RBI) reduced the policy repo rate by 25 basis points to 5.25 percent and lowered its CPI forecast for FY26 to 2.0 percent, signaling a balanced approach to growth and inflation.

Employment strengthened in 2025 with economic recovery. November unemployment fell to 4.8 percent, 3.9 percent in rural and 6.5 percent in urban areas, while female participation, labour force participation at 55.8 percent, and the worker population ratio at 53.2 percent, all improved.

Trade and External Sector

India’s trade gained in 2025, with merchandise exports rising to USD 38.13 billion in November and services exports up 8.65 percent to USD 270.06 billion in April-November, led by engineering goods, electronics, pharmaceuticals, gems and jewellery, petroleum products, and computer and business services.

India’s foreign exchange reserves reached USD 686.2 billion, covering over 11 months of imports. The current account deficit narrowed to 1.3 percent of GDP in Q2 FY26 from 2.2 percent a year ago, supported by strong services exports and remittances. Gross FDI rose 19.4 percent, while net FDI more than doubled.

Outlook and Global Recognition

India, with a GDP of USD 4.18 trillion, has surpassed Japan to become the world’s fourth-largest economy and is projected to overtake Germany by 2030, reaching USD 7.3 trillion. Global institutions, including the World Bank, IMF, OECD, Moody’s, S&P, Fitch, and ADB, expect India to remain one of the fastest-growing major economies.

High-frequency indicators, favourable agricultural prospects, strong corporate and banking balance sheets, low inflation, and sustained reform momentum were cited as factors expected to keep growth on track, with services exports and trade negotiations providing additional upside.

(KNN Bureau)