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