Daijiworld Media Network – New Delhi

New Delhi, Dec 27: As 2025 draws to a close, India’s economic narrative defies easy categorisation. While global trade wars, tariff shocks and geopolitical uncertainties posed challenges, the Indian economy demonstrated notable resilience, reform-driven momentum and recalibration, emerging as one of the world’s fastest-growing major economies — albeit not without its share of strains.

From record highs in equity markets to a weakening rupee, from expanding global trade partnerships to sudden protectionist measures abroad, India’s economic trajectory in 2025 underscored how deeply global forces now shape domestic outcomes.

India’s growth story stood out on the global stage. Already the world’s fourth-largest economy, India remains on course to become the third-largest by 2030, with GDP projected at $6.63 trillion, according to the IMF’s World Economic Outlook.

The highlight came with the release of Q2 GDP data for FY 2025-26, which showed the economy expanding by a robust 8.2% during the July–September quarter — a six-quarter high and well above market expectations and RBI projections. Growth in the April–June quarter stood at 7.8%, pushing first-half growth to around 8%.

Chief Economic Adviser V Anantha Nageswaran said full-year growth was expected to be 7% or higher, reinforcing India’s status as the fastest-growing major economy even as global growth slowed and tariff pressures on exports intensified.

Prime Minister Narendra Modi hailed the numbers as proof of reform-led growth and policy continuity, saying the performance reflected the enterprise and hard work of the people.
If growth was impressive, inflation was the year’s biggest surprise. The Reserve Bank of India (RBI) described the macro environment as a rare “Goldilocks phase”, combining strong growth with low inflation.

Retail inflation dropped to a historic low of 0.25% in October 2025, the lowest since the current CPI series began. Though inflation edged up to 0.71% in November, it remained well below the RBI’s 4% target, largely driven by falling food prices. The RBI now projects average inflation at around 2% for the fiscal year.

With inflation under control, the RBI adopted an accommodative stance, cutting the repo rate by a cumulative 125 basis points during 2025 to 5.25% — its most aggressive easing cycle since 2019. The central bank also revised its full-year growth forecast upwards to about 7.3%, creating room for further policy support.

A major reform milestone came with the rollout of GST 2.0 in September. The overhaul simplified the tax structure into two slabs — 5% and 18%, while taxing luxury and sin goods at 40%. Essentials, household goods, medicines, farm equipment and life insurance premiums became cheaper or GST-free, easing compliance and boosting demand.

The Union Budget 2025 further supported households by offering zero income tax up to Rs 12 lakh, effectively Rs 12.75 lakh for salaried taxpayers, significantly improving disposable incomes and consumer sentiment.

Equity markets saw sharp swings through the year. After a cautious start, markets rallied mid-year before facing turbulence following fresh tariff announcements by US President Donald Trump in April. Despite volatility and foreign portfolio outflows, benchmarks hit record highs, with the Nifty 50 touching 26,326 and the Sensex closing at a peak of 86,159.02 during the year.

However, momentum softened towards year-end amid global uncertainty, with markets closing slightly lower in the final sessions.

Despite rising protectionism globally, India stepped up trade diplomacy. Key highlights included the India–New Zealand Free Trade Agreement, offering duty-free access to Indian exports, and the India–Oman CEPA, expanding India’s footprint in the Gulf region. Experts described these deals as watershed moments for India’s export-led growth strategy.

In sum, 2025 emerged as a year of strong growth tempered by global risks. Tax reforms, low inflation, accommodative monetary policy and proactive trade engagement provided a supportive domestic environment, even as currency volatility and external shocks remained concerns.

As the RBI noted, economic activity benefited from GST and income tax rationalisation, softer crude prices, government capex and benign inflation — positioning India for sustained expansion as it heads into 2026.