The Indian economy is on a steady upward climb as we move through 2025-26, riding high on resilient economic indicators and strong domestic demand. According to the latest monthly report from the Ministry of Finance, high-frequency metrics like e-way bill generation, fuel consumption, and PMI indices reflect sustained economic activity. The outlook remains positive, with rural demand getting a boost from a healthy rabi harvest and promising monsoon forecasts. Urban consumption, too, is holding steady, driven by increased travel and hospitality activity. More people are flying, and hotels are seeing higher occupancy rates, signaling confidence in spending.
But it’s not all smooth sailing. Some sectors, like construction and vehicle sales, show signs of softening. The finance ministry’s report highlights this mixed performance, indicating that while the broad trend is positive, certain industries face challenges. Inflation, however, is firmly under control. Retail and food price inflation have seen a broad-based decline in May 2025, hitting a six-year low at 2.82 percent year-on-year. This keeps it well within the Reserve Bank of India’s target range of 2-6 percent, offering relief to households.
The growth story doesn’t stop there. India’s real GDP expanded by 6.5 percent in 2024-25, mirroring the Second Advance Estimates. Despite geopolitical tensions and global trade uncertainties, domestic demand—especially rural consumption—played a key role. Investments held steady, and net exports contributed positively to the economy. The services sector led the charge in growth, while industry and agriculture also made significant contributions.
On the external front, India’s exports have remained resilient. Both merchandise and services exports grew by 2.8 percent year-on-year in May 2025, even amid global economic sluggishness. Foreign exchange reserves stand strong at $699 billion as of mid-June, providing a comfortable import cover of 11.5 months. The Indian rupee, meanwhile, has shown moderate volatility compared to other currencies, reinforcing financial stability.
The job market is also looking up. Hiring in white-collar sectors like AI/ML, insurance, real estate, BPO/ITES, and hospitality has picked up. PMI employment sub-indices suggest robust job growth, and formal employment is rising, as seen in net payroll additions under the EPFO. With GDP growth consistently above 6 percent in recent years, India remains one of the fastest-growing major economies globally.
Looking ahead, the ambition is clear. India aims to become a developed economy by 2047, a vision termed ‘Viksit Bharat’. To get there, experts suggest maintaining an 8 percent growth rate over the next two decades. The country has already made strides, moving from being the 11th largest economy in 2013-14 to fourth in 2025-26. However, challenges like low per capita income persist. Still, with strong fundamentals, controlled inflation, and resilient growth drivers, India’s economic journey continues on a promising path.