According to the Reserve Bank of India's (RBI) latest monthly bulletin, India is expected to sustain its position as the world's fastest-growing major economy in the fiscal year 2025-26. The bulletin projects a real GDP growth rate of approximately 7.0% for 2025-26, following a projected 7.2% growth in 2024-25. This forecast aligns with estimates from the International Monetary Fund (IMF) and the World Bank, which anticipate India's GDP growth at 6.5% and 6.7%, respectively, for the same period.

The optimistic growth outlook is attributed to several factors, including strategic fiscal measures and robust domestic demand. The Union Budget for 2025-26 emphasizes a balanced approach to fiscal consolidation while prioritizing capital expenditure. The effective capital expenditure-to-GDP ratio is projected to rise to 4.3% in 2025-26, up from 4.1% in the revised estimates for 2024-25. This increase is expected to stimulate economic activity and enhance infrastructure development.

Inflation has shown signs of moderation, with retail inflation easing to a five-month low of 4.3% in January 2025, primarily due to a sharp decline in vegetable prices following the arrival of winter crops. The RBI projects that inflation will average 4.5% in 2024-25 and 4.1% in 2025-26, remaining within the target tolerance band.

High-frequency indicators point to a sequential pickup in economic activity during the second half of 2024-25, a momentum expected to continue into 2025-26. Key indicators such as higher tractor sales, increased fuel consumption, and sustained growth in air passenger traffic suggest a recovery in economic momentum. Rural demand remains resilient, driven by rising farm incomes, while urban demand has improved, supported by measures to boost household incomes and consumption.

Despite global uncertainties, India's strong macroeconomic fundamentals and improvements in external sector indicators have positioned the economy to navigate challenges effectively. The RBI emphasizes the importance of continued structural reforms and prudent fiscal management to sustain this growth trajectory in the coming years.