Bye, bye 2025: India to welcome 2026 on strong economic footing, high growth, low inflation
Virendra Pandit
New Delhi: Outgrowing concerns expressed in some quarters because of Trump tariffs and geopolitical uncertainties, India is on track to conclude 2025 as one of its most significant years of economic performance, with key macroeconomic indicators reflecting strong growth, low inflation, expanded exports and improved labour market conditions, the government said in its year-end economic review on Tuesday.
India’s real Gross Domestic Product (GDP) expanded at 8.2 percent in the second quarter of the financial year (FY) 2025-26, marking a six-quarter high and underscoring resilient domestic demand amidst a challenging global trade environment.
The momentum continued after growth rates of 7.8 percent in the Q1FY25 and 7.4 percent in Q4FY25. The government highlighted that the real Gross Value Added (GVA), a measure of domestic production, grew by 8.1 percent in Q2FY26, driven by buoyancy in both the industrial and services sectors.
The sustained expansion signals a broad-based upturn in economic activity across key sectors. Inflation trends remained largely benign throughout the year, with the Consumer Price Index (CPI) inflation rate steadily softening from 4.26 percent in January 2025 to 0.71 percent in November 2025, offering the Reserve Bank of India (RBI) policy space to maintain a supportive monetary stance.
Wholesale Price Index (WPI) inflation also moderated during the year, reinforcing the overall price stability environment. On employment, the latest labour force estimates revealed a notable improvement in job market conditions. In November 2025, the unemployment rate fell to 4.7 percent, down from 5.2 percent in October, the lowest level recorded since April 2025.
The decline was broad-based, with both urban and rural segments contributing to the improvement. The overall labour force and worker participation rates also showed encouraging trends. Export performance strengthened during 2025, with merchandise exports reaching USD 38.13 billion in November, up from USD 36.43 billion in January.
Services exports, a key pillar of the external sector, also recorded solid growth, reflecting India’s expanding footprint in global value chains and rising demand for Indian software, business services and other globally tradable services. External sector resilience was further evidenced by robust foreign exchange reserves and improved current account dynamics. Remittances remained strong, helping to moderate the current account deficit alongside solid services export receipts.
Government emphasised that the combination of strong domestic demand, structural reforms, supportive monetary conditions and stable price levels has contributed to what they described as a “Goldilocks moment” for the Indian economy, characterised by both high growth and low inflation.
With a GDP value surpassing USD 4.18 trillion, India is now the world’s fourth-largest economy and is projected to ascend further in global rankings in the coming years. Projections from both domestic and international institutions suggest continued expansion, underscoring India’s potential to sustain robust growth through 2026 and beyond.
The government reiterated its commitment to structural reforms and policy measures designed to sustain economic momentum while broadening the base of inclusive growth.
