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India Set to End 2025 on Strong Economic Footing with High Growth and Low Inflation
India is poised to finish 2025 on a remarkable economic note, showcasing strong growth while maintaining low inflation, according to a recent government economic review. This optimistic outlook highlights several key factors contributing to what officials are calling a “Goldilocks moment” for the Indian economy.
Key Economic Indicators
– Robust GDP Growth: India’s real Gross Domestic Product (GDP) surged by 8.2% in the second quarter of the financial year (FY) 2025-26, marking a six-quarter high and reflecting resilient domestic demand despite global trade challenges. The growth rates in preceding quarters were 7.8% for Q1 and 7.4% for Q4 of FY 2024-25.
– Real Gross Value Added: For Q2 of FY 2025-26, real Gross Value Added (GVA) grew by 8.1%, fueled by positive performance in both the industrial and services sectors, indicating a broad-based economic upswing.
– Inflation Trends: The Consumer Price Index (CPI) inflation rate demonstrated notable stability throughout the year, easing from 4.26% in January 2025 to just 0.71% in November 2025. This decline provides the Reserve Bank of India (RBI) with the flexibility to maintain supportive monetary policies.
– Labour Market Improvement: November 2025 marked a significant decrease in the unemployment rate, which fell to 4.7% from 5.2% in October, the lowest since April 2025. Both urban and rural areas contributed to this positive trend in employment.
Export Performance and External Sector Resilience
– Merchandise Exports: By November 2025, merchandise exports reached USD 38.13 billion, an increase from USD 36.43 billion in January. The services sector also saw solid growth, reflecting India’s expanding role in global value chains, particularly in software and business services.
– Foreign Exchange Reserves: Strengthened foreign exchange reserves and improved current account dynamics further illustrate the resilience of India’s external sector. Strong remittances continue to cushion the current account deficit, alongside solid service export receipts.
Conclusion
With a GDP now exceeding USD 4.18 trillion, India has positioned itself as the world’s fourth-largest economy, with projections indicating sustained growth well into 2026 and beyond. The government remains committed to implementing structural reforms and policy measures aimed at maintaining this economic momentum and promoting inclusive growth. The combination of strong domestic demand, supportive monetary conditions, and stable price levels contributes to a favorable environment characterized by high growth and low inflation, emphasizing India’s promising trajectory for the coming years.