India to remain fastest-growing economy in 2025-2026: RBI

The Reserve Bank of India's (RBI) latest monthly bulletin highlighted that sustained growth momentum and strategic budgetary policies will likely keep India's economy as the major economy with the fastest rate of growth in 2025–2026.

The bulletin anticipates 6.5% and 6.7% GDP growth for 2025–2026, respectively, based on estimates from the World Bank and the International Monetary Fund (IMF).

In the later half of 2024–2025, high-frequency indicators point to a recovery in economic activity that is expected to last into the future, regardless of global uncertainty.

According to the RBI report, growth goals and budgetary consolidation were carefully balanced in the Union Budget 2025–2026.

It keeps concentrating on capital expenditures while putting policies in place to increase household incomes and consumption.

In 2025–2026, the effective capital expenditure-to-GDP ratio is expected to increase from 4.1% in the updated estimates for 2024–2025 to 4.3%.

January saw a five-month low of 4.3% for retail inflation, mostly as a result of an abrupt decrease in vegetable prices when winter crops arrived.

According to the January Purchasing Managers' Index (PMI), industrial activity also improved.

Important signs that point to an upsurge in economic momentum include rising tractor sales, rising fuel consumption, and steady increases in air travel.

The bulletin emphasizes how growing farm earnings are fueling rural demand, which is still strong.

Sales of fast-moving consumer goods (FMCG) in rural regions increased from 5.7% in Q2 of 2024–25 to 9.9% in Q3 of the same year.

With sales growth increasing to 5% from 2.6% in the prior quarter, urban demand also strengthened.

RBI surveys indicate improved corporate performance, with non-government, non-financial companies seeing higher sales growth and operating margins in Q3.

Private sector investment remained stable, with ₹1 lakh crore in project sanctions. ECBs and IPOs for capital expenditure increased.

However, global trade uncertainties and geopolitical tensions led to market declines, with FPIs contributing and the Indian rupee depreciating amid a strong US dollar.

India’s strong macroeconomic fundamentals and improvements in external sector indicators have helped it weather global uncertainties, according to a report.

While global growth continues at a moderate pace, prospects vary across countries due to political and technological shifts.

Financial markets remain cautious, and emerging economies, including India, face challenges from FPI selling and currency depreciation caused by a strong US dollar.