India Will Remain Fastest Growing GDP in FY26, Says RBI Bulletin

Mumbai: High frequency indicators point towards a sequential pick-up in momentum of India’s economic activity during the second half of 2024-25, which is likely to sustain moving forward, according to the latest RBI monthly bulletin.

In a challenging and increasingly uncertain global environment, the Indian economy is poised to sustain its position as the fastest growing major economy during 2025-26 as per the IMF and World Bank estimates of GDP growth of 6.5 per cent and 6.7 per cent, respectively, the report points out.

It further states that the Union Budget 2025-26 prudently balances fiscal consolidation and growth objectives by continued focus on capex alongside measures to boost household incomes and consumption.

The effective capital expenditure/GDP ratio is budgeted to improve to 4.3 per cent in 2025- 26 from 4.1 per cent in 2024-25 (revised estimate). Retail inflation moderated to a five-month low of 4.3 per cent in January, mainly due to a sharp decline in vegetable prices driven by the arrival of winter crops in the market, the report states.

High frequency indicators show that the economy is on a path of recovery during H2:2024-25 from the loss of momentum witnessed in H1. Industrial activity has recorded an improvement over the previous quarter, as reflected in the Purchasing Managers’ Index (PMI) in January.

Pick-up in tractor sales growth, and fuel consumption, and sustained growth in air passenger traffic also point to a recovery in overall momentum, according to the bulletin. It also highlights that rural demand continues to hold up, buoyed by increasing farm incomes.

In rural areas, sales of Fast-Moving Consumer Good (FMCG) companies grew by 9.9 per cent in Q3:2024-25, much higher than 5.7 per cent in Q2. Urban demand also exhibited a recovery with 5 per cent growth in Q3, being nearly double of 2.6 per cent in the previous quarter.

The enterprise surveys conducted by the Reserve Bank corroborate this assessment.