MAJOR ECONOMIC TRENDS IN INDIA
Analysis Based on RBI Bulletin January 2026
Prepared
for GST Intelligence Analysis
Executive Summary
The Indian economy continues to
demonstrate resilience with GDP growth at 6.7% in Q2 2025-26, supported by
strong services sector performance and easing inflationary pressures. Key
highlights include:
• Real
GVA growth accelerated to 8.1% in Q2 FY26 from 5.8% in Q1 FY26
• CPI
inflation moderated to 5.5% in November 2025 from 6.2% a year ago
• RBI
reduced Policy Repo Rate by 100 bps to 5.50% (from 6.50% in 2024)
• Foreign
Exchange Reserves stand at $696.61 billion as of December 26, 2025
• Trade
deficit narrowed in November 2025 with improving export performance
1. Real Sector Performance
1.1 GDP and GVA Growth
The economy has shown robust
growth momentum, with GVA growth accelerating significantly in recent quarters.
|
Indicator |
FY 2024-25 |
Q1 FY26 |
Q2 FY26 |
Change |
|
GVA at Basic Prices (%) |
7.3 |
5.8 |
8.1 |
+2.3 pp |
|
Agriculture |
3.1 |
3.7 |
3.5 |
-0.2 pp |
|
Industry |
5.8 |
5.8 |
7.9 |
+2.1 pp |
|
Services |
8.8 |
9.0 |
9.0 |
Stable |
|
Final Consumption Expenditure |
6.8 |
7.1 |
6.5 |
-0.6 pp |
|
Gross Fixed Capital Formation |
7.8 |
7.8 |
7.3 |
-0.5 pp |
Key Observations: Services sector remains the primary
growth driver at 9.0%. Industrial growth recovered sharply to 7.9% in Q2 from
5.8% in Q1, indicating manufacturing revival. Agricultural growth moderated
slightly but remains positive.
1.2 Index of Industrial Production (IIP)
Industrial production showed
mixed trends across sectors and use-based categories.
|
Sector/Category |
Nov 2024 |
Nov 2025 |
|
General Index |
148.1 |
158.0 |
|
Mining |
133.8 |
141.0 |
|
Manufacturing |
147.0 |
158.8 |
|
Electricity |
184.1 |
181.3 |
|
Capital Goods |
106.7 |
117.8 |
|
Infrastructure/Construction |
177.3 |
198.7 |
2. Monetary and Banking Sector
2.1 Policy Rates and Monetary Stance
The RBI has adopted an
accommodative monetary stance with significant rate cuts to support growth
while inflation moderates.
|
Policy Rate |
Nov 2024 |
Nov 2025 |
|
Policy Repo Rate |
6.50% |
5.50% |
|
Fixed Reverse Repo Rate |
3.35% |
3.35% |
|
Standing Deposit Facility (SDF) |
6.25% |
5.25% |
|
Marginal Standing Facility (MSF) |
6.75% |
5.75% |
|
Bank Rate |
6.75% |
5.75% |
|
Cash Reserve Ratio (CRR) |
4.50% |
3.25% |
|
Call Money Rate (Weighted Avg) |
6.63% |
5.45% |
|
10-Year G-Sec Yield |
6.81% |
6.55% |
Key Observation: The 100 basis points reduction in Repo
Rate and 125 bps cut in CRR indicate RBI's focus on boosting liquidity and
supporting credit growth.
2.2 Bank Credit and Deposits Growth
|
Indicator |
Nov 2024 |
Nov 2025 |
|
SCB Deposits Growth (YoY %) |
11.5% |
10.2% |
|
SCB Credit Growth (YoY %) |
11.8% |
11.5% |
|
Non-food Credit Growth (YoY %) |
11.8% |
11.4% |
|
Credit-Deposit Ratio |
79.4% |
80.5% |
|
Reserve Money (M0) Growth |
9.0% |
1.6% |
|
Broad Money (M3) Growth |
10.7% |
9.9% |
2.3 Sectoral Credit Deployment
|
Sector |
Outstanding (Rs Cr) |
YTD Growth % |
YoY Growth % |
|
Total Bank Credit |
1,95,27,313 |
7.0% |
11.5% |
|
Agriculture & Allied |
24,17,050 |
5.7% |
8.7% |
|
Industry (Micro, Small, Medium, Large) |
42,19,433 |
5.9% |
9.6% |
|
- Micro & Small |
9,52,302 |
19.3% |
24.6% |
|
- Large |
28,70,032 |
1.6% |
4.6% |
|
Services |
53,59,639 |
5.2% |
11.7% |
|
- NBFCs |
17,23,493 |
5.4% |
9.5% |
|
Personal Loans |
64,86,418 |
8.6% |
12.8% |
|
- Housing |
31,95,341 |
6.1% |
9.9% |
|
- Gold Loans |
3,58,645 |
73.9% |
125.3% |
Key Observations: MSME credit shows strong growth at
24.6% YoY, indicating policy focus on small enterprises. Gold loans witnessed
exceptional growth of 125.3% YoY, reflecting changing borrowing patterns.
Credit card outstanding declined by 5.9% while vehicle loans remain robust at
12.4% YoY.
3. Inflation Dynamics
3.1 Consumer Price Inflation
|
Category
(CPI Base: 2012=100) |
Dec 2024 |
Dec 2025 (P) |
|
General Index (Combined) |
198.4 |
198.0 |
|
Food and Beverages |
205.9 |
202.1 |
|
- Cereals |
198.1 |
197.4 |
|
- Vegetables |
258.3 |
210.6 |
|
- Pulses |
214.1 |
181.8 |
|
Fuel and Light |
177.8 |
181.3 |
|
Housing |
181.7 |
186.9 |
|
Miscellaneous |
186.5 |
198.0 |
3.2 Inflation Rates (YoY %)
|
Inflation
Measure |
Nov 2024 |
Nov 2025 |
|
CPI Inflation (All India) |
6.2% |
0.7% |
|
CPI - Industrial Workers |
4.4% |
2.6% |
|
WPI Inflation |
2.8% |
-0.3% |
|
WPI - Primary Articles |
8.3% |
-2.9% |
|
WPI - Fuel & Power |
-4.3% |
-2.3% |
|
WPI - Manufactured Products |
1.8% |
1.3% |
Key Observation: Inflation has moderated significantly
with CPI falling to 0.7% in November 2025 from 6.2% a year ago. Vegetable
prices showed substantial correction (down from 258.3 to 210.6 index), and
pulses prices declined from 214.1 to 181.8 index, providing relief to
consumers.
4. External Sector
4.1 Foreign Trade
|
Trade Item
(US $ Million) |
Nov 2024 |
Nov 2025 |
Change % |
|
Exports |
31,943 |
38,116 |
+19.3% |
|
- Oil Exports |
3,521 |
3,918 |
+11.3% |
|
- Non-Oil Exports |
28,421 |
34,199 |
+20.3% |
|
Imports |
63,929 |
62,662 |
-2.0% |
|
- Oil Imports |
15,908 |
14,115 |
-11.3% |
|
- Non-Oil Imports |
48,020 |
48,547 |
+1.1% |
|
Trade Deficit |
-31,986 |
-24,546 |
-23.3% |
4.2 Foreign Exchange Reserves
|
Component
(US $ Million) |
Jan 3, 2025 |
Dec 26, 2025 |
|
Total Reserves |
6,34,585 |
6,96,610 |
|
Foreign Currency Assets |
5,45,480 |
5,59,612 |
|
Gold |
67,092 |
1,13,320 |
|
SDRs |
17,815 |
18,803 |
|
Reserve Position in IMF |
4,199 |
4,875 |
|
Gold Holdings (Metric Tonnes) |
876.18 |
880.18 |
4.3 Exchange Rate and NEER/REER
|
Indicator |
Nov 2024 |
Nov 2025 |
|
INR-USD Spot Rate (Rs per $) |
84.08 |
89.46 |
|
INR-Euro Spot Rate (Rs per Euro) |
90.96 |
103.63 |
|
NEER (40-Currency, Base 2015-16) |
91.53 |
82.66 |
|
REER (40-Currency, Base 2015-16) |
106.92 |
95.30 |
Key Observations: The rupee depreciated from Rs 84.08/$
to Rs 89.46/$ (6.4% depreciation). Trade deficit narrowed by 23.3% due to
strong export growth (+19.3%) and declining oil imports (-11.3%). Gold reserves
increased significantly from $67 billion to $113 billion, reflecting RBI's
diversification strategy.
5. Capital Flows and Balance of Payments
5.1 Foreign Investment Flows
|
Investment
Type (US $ Million) |
Apr-Nov 2024-25 |
Apr-Nov 2025-26 |
|
Net FDI |
781 |
5,629 |
|
- FDI to India (Gross) |
55,768 |
64,732 |
|
- FDI by India (Outward) |
16,381 |
22,102 |
|
Net Portfolio Investment |
7,611 |
-34 |
|
- FPI Inflows |
7,487 |
1,281 |
|
Total Foreign Investment |
8,392 |
5,595 |
5.2 NRI Deposits
|
Scheme (US $
Million) |
Outstanding Nov 2024 |
Outstanding Nov 2025 |
|
Total NRI Deposits |
1,62,697 |
1,67,973 |
|
FCNR(B) |
32,040 |
34,672 |
|
NR(E)RA |
1,00,666 |
1,00,502 |
|
NRO |
29,992 |
32,799 |
6. Government Finances
6.1 Union Government Accounts (April-November)
|
Item (Rs
Crore) |
Apr-Nov 24-25 |
Apr-Nov 25-26 |
% of BE 25-26 |
|
Revenue Receipts |
18,70,455 |
19,10,312 |
55.9% |
|
- Tax Revenue (Net) |
14,43,435 |
13,93,946 |
49.1% |
|
- Non-Tax Revenue |
4,27,020 |
5,16,366 |
88.6% |
|
Total Receipts (ex. borrowings) |
18,94,408 |
19,49,239 |
55.7% |
|
Revenue Expenditure |
22,27,502 |
22,67,700 |
57.5% |
|
- Interest Payments |
6,58,494 |
7,45,765 |
58.4% |
|
Capital Expenditure |
5,13,500 |
6,58,210 |
58.7% |
|
Total Expenditure |
27,41,002 |
29,25,910 |
57.8% |
|
Revenue Deficit |
3,57,047 |
3,57,388 |
68.2% |
|
Fiscal Deficit |
8,46,594 |
9,76,671 |
62.3% |
Key Observations: Capital expenditure shows robust
growth with 58.7% of BE utilized vs 46.2% in the previous year, indicating
accelerated infra spending. Non-tax revenue is buoyant at 88.6% of BE. Fiscal
deficit at 62.3% of BE is on track for consolidation.
7. Digital Payments and Financial Inclusion
7.1 Digital Payment Volumes
|
Payment
System (Lakh Transactions) |
Nov 2024 |
Nov 2025 |
|
Total Digital Payments |
1,83,509 |
2,38,888 |
|
UPI |
1,54,820 |
2,04,670 |
|
IMPS |
4,079 |
3,689 |
|
NEFT |
7,770 |
8,175 |
|
RTGS (Customer Transactions) |
239 |
284 |
|
Credit Card Transactions |
3,936 |
5,030 |
|
Debit Card Transactions |
1,232 |
1,012 |
|
PPI (Wallets + Cards) |
5,848 |
8,973 |
7.2 Payment Infrastructure
|
Infrastructure
(Lakh) |
Nov 2024 |
Nov 2025 |
|
Total Cards (Credit + Debit) |
10,868 |
11,449 |
|
Credit Cards |
1,072 |
1,149 |
|
Debit Cards |
9,796 |
10,300 |
|
PPIs (Wallets + Cards) |
15,627 |
19,107 |
|
ATMs |
2.55 |
2.51 |
|
PoS Terminals |
96.91 |
112.54 |
|
UPI QR Codes |
6,262 |
7,283 |
Key Observations: UPI continues exponential growth with
32% YoY increase in transactions. PPI usage grew by 53%. Credit card
transactions increased by 28% while debit card usage declined 18%, indicating
shift to digital wallets. UPI QR infrastructure expanded by 16%.
8. Key Takeaways and Outlook
8.1 Positive Developments
1. GDP
growth remains robust with GVA at 8.1% in Q2 FY26, driven by strong services
(9.0%) and recovering industry (7.9%)
2. Inflation
has moderated significantly, providing room for accommodative monetary policy
3. Foreign
exchange reserves at record high of $696.6 billion provide comfortable import
cover
4. Trade
deficit narrowed by 23% in November 2025 with strong export performance
(+19.3%)
5. Capital
expenditure by government accelerated to 58.7% of budget estimates
6. MSME
credit growth strong at 24.6% YoY, supporting small business development
7. Digital
payments ecosystem expanding rapidly with UPI growing 32% YoY
8.2 Areas of Concern
8. Rupee
depreciation of 6.4% may increase import costs and add to inflation pressures
9. FPI
outflows turned negative at -$34 million in Apr-Nov 2025-26 vs +$7.6 billion
last year
10. Deposit
growth (10.2%) lagging credit growth (11.5%) may create liquidity challenges
11. Reserve
money growth declined sharply to 1.6% from 9.0% a year ago
12. Net tax
revenue collection (49.1% of BE) lags previous year (55.9%), needs monitoring
8.3 Implications for GST Intelligence
• Strong
MSME credit growth (24.6%) may indicate expanding business activity - monitor
new GSTIN registrations in MSME sector
• Manufacturing
IIP growth of 8% suggests industrial activity pickup - correlate with GST
collections from manufacturing sector
• Services
sector GVA at 9% indicates strong compliance potential in services GST
• Digital
payment growth (32% UPI) provides better transaction trails for compliance
verification
• Gold
loan surge (125% YoY) may warrant scrutiny for any revenue leakage linkages
• Export
growth of 19.3% - ensure proper IGST refund claim verification and export
documentation
