Growth of Indian Economy

India’s economy continues to show strong growth and stability, supported by strong domestic demand and stable macroeconomic conditions.

GDP Growth in FY 2025–26

According to estimates, Real GDP (GDP at constant prices) is expected to reach ₹201.90 lakh crore (US$ 2.24 trillion) in FY 2025–26. This is higher than the ₹187.97 lakh crore (US$ 2.26 trillion) recorded in FY 2024–25, showing a strong growth rate of about 7.4%.

At current prices, India’s Nominal GDP is projected to reach ₹357.14 lakh crore (US$ 3.96 trillion) in FY 2025–26. This is an increase from ₹330.68 lakh crore (US$ 3.98 trillion) in the previous year, reflecting a growth of around 8.0%.

Growth in Gross Value Added (GVA)

On the production side, Real Gross Value Added (GVA) is estimated to reach ₹184.50 lakh crore (US$ 2.04 trillion) in FY 2025–26, compared to ₹171.87 lakh crore (US$ 2.07 trillion) in FY 2024–25. This indicates a growth of 7.3%.

Similarly, Nominal GVA is expected to increase from ₹300.22 lakh crore (US$ 3.62 trillion) to ₹323.48 lakh crore (US$ 3.59 trillion), registering a growth of about 7.7%.

Overall, these numbers show that India continues to be one of the fastest-growing major economies in the world, with growth supported by multiple sectors of the economy.

Future Economic Projections

India’s economy is expected to continue growing rapidly in the coming years. It is projected that:

  • India could reach a GDP of ₹4,26,45,000 crore (US$ 5 trillion) by 2027.
  • The country may surpass Germany’s economy by 2028, becoming one of the largest economies in the world.

Economic growth is expected to be supported by:

  • Rising employment
  • Increasing private consumption
  • Improving consumer confidence

India is also becoming a strong startup hub, with 126 unicorn startups (companies valued at over US$1 billion). In 2025 alone, six new startups achieved unicorn status.

Current Account Deficit

India’s current account deficit (CAD) has improved in recent months.

In Q2 FY 2025–26 (July–September), the CAD stood at:

  • ₹1.02 lakh crore (US$ 11.7 billion)
  • This equals 1.3% of GDP

In comparison, during the same quarter last year:

  • CAD was ₹1.73 lakh crore (US$ 20.8 billion)
  • Equal to 2.2% of GDP

The improvement mainly happened because of a lower merchandise trade deficit.

In the previous quarter, the deficit was even smaller at:

  • ₹0.20 lakh crore (US$ 2.33 billion)
  • About 0.2% of GDP

This shows that India’s external sector is becoming stronger and more stable.

Export Outlook

According to Commerce and Industry Minister Piyush Goyal, India’s exports are expected to reach US$ 1 trillion by 2030. Strong exports will play an important role in supporting long-term economic growth.

Strong Macroeconomic Fundamentals

India’s economic outlook remains positive due to several strong factors, including:

  • Stable macroeconomic environment
  • Strong domestic demand
  • Continuous investment growth

With Real GDP growth estimated at 7.4% in FY 2025–26, India continues to rank among the fastest-growing large economies in the world. Growth is supported by expansion across manufacturing, services, and infrastructure sectors.

Strong External Position

India’s external financial position remains stable.

The country’s foreign exchange reserves are around:

  • ₹61.96 lakh crore (US$ 687.19 billion)

In addition, India continues to receive strong foreign investments through:

  • Foreign Direct Investment (FDI)
  • Private Equity and Venture Capital (PE–VC) investments
  • Debt investments

These inflows increase investor confidence in India’s long-term economic growth.

Strong Domestic Demand and Industry Growth

Domestic demand remains one of the main drivers of India’s growth. Several indicators show strong economic activity, such as:

  • Low and controlled inflation
  • Increase in air passenger traffic
  • Strong GST collections
  • Active participation of domestic institutional investors (DIIs) in capital markets

The manufacturing sector is also performing well. The Purchasing Managers’ Index (PMI) remains in expansion territory, and Industrial Production (IIP) growth is improving.

Structural Growth Drivers

The government’s focus on key areas is also strengthening long-term economic growth. These include:

  • Renewable energy development
  • Innovation and technology
  • Food security initiatives
  • Infrastructure development

Overall Outlook

All these factors together show that India’s economy is on a strong growth path. With continued investment, rising consumption, and strong policy support, India is expected to:

  • Maintain high economic growth
  • Increase capital formation
  • Strengthen its position as a major global economic growth engine in the coming years.

India is primarily a domestic demand-driven economy, with consumption and investments contributing to 70% of the economic activity. With India’s economy showing resilient growth, supported by strong domestic demand, policy reforms, and a healthy investment pipeline, several new projects and developments are underway across key sectors. According to World Bank, India must continue to prioritise lowering inequality while also putting growth-oriented policies into place to boost the economy. In view of this, there have been some developments that have taken place in the recent past. Some of them are mentioned below.

  • On the FDI front, according to the Department for Promotion of Industry and Internal Trade (DPIIT), India’s cumulative FDI inflow stood at Rs. 99,08,749 crore (US$ 1.12 trillion) between April 2000-September 2025; with major share of FDI equity inflow, coming from Singapore at Rs. 13,21,127 crore (US$ 186.82 billion) with a total share of 24.45%, followed by Mauritius at Rs. 11,22,807 crore (US$ 183.66 billion) with 24.04%, the USA at Rs. 5,50,450 crore (US$ 77.27 billion) with 10.11%, the Netherlands at Rs. 3,77,094 crore (US$ 54.93 billion) with 7.19%, and Japan at Rs. 2,93,863 crore (US$ 45.61 billion) with 5.97%.
  • As of January 9, 2026, India’s foreign exchange reserves stood at Rs. 61,95,896 crore (US$ 687.19 billion).
  • In November 2025, India recorded 113 Private Equity (PE)–Venture Capital (VC) deals valued at Rs. 46,500 crore (US$ 5.6 billion), marking a 31% year-on-year increase from Rs. 35,700 crore (US$ 4.3 billion) in November 2024. On a month-on-month basis, investment value rose by 4% compared to Rs. 44,800 crore (US$ 5.4 billion) in October 2025. Deal activity also strengthened, with the number of transactions increasing 12% year-on-year from 101 deals in November 2024 and 4% month-on-month from 109 deals in October 2025, reflecting sustained momentum in India’s PE/VC investment landscape.
  • During FY 2025–26 (up to January 27, 2026), Foreign Portfolio Investor (FPI) activity in India indicated a phase of portfolio optimisation and asset reallocation amid evolving global market conditions. While foreign investors moderated direct equity exposure, debt instruments continued to attract investments of over Rs. 2,100 crore (US$ 0.25 billion), supported by stable macroeconomic fundamentals and policy continuity. FPIs also channelled Rs. 17,025 crore (US$ 2.0 billion) into mutual fund schemes, reflecting a preference for diversified and professionally managed market exposure. Domestic Institutional Investors (DIIs) played a stabilising role in the equity cash market during FY 2025–26 (April–December 2025), recording net purchases of around Rs. 5.99 lakh crore (US$ 66.55 billion). Strong and consistent buying by mutual funds, insurance companies, and pension funds helped offset periods of foreign portfolio moderation.
  • India’s manufacturing sector continued to expand in December, with the seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) remaining firmly in expansionary territory at 55.0, despite easing from 56.6 in November. Importantly, the index stayed above its long-run average, indicating sustained improvement in overall sector health. New orders continued to rise at a strong pace, supported by steady domestic demand, while output growth, although moderating, reflected ongoing capacity utilisation.
  • India’s consumer price inflation remained subdued and well-anchored in December 2025, reflecting a stable price environment across the economy. Headline inflation, based on the All-India Consumer Price Index (CPI), stood at 1.33% year-on-year, indicating continued moderation in price pressures. The marginal month-on-month uptick of 62 basis points from November 2025 reflects normal seasonal movements, while overall inflation remained comfortably low, underscoring effective supply management and macroeconomic stability.
  • India’s GST collections continued to demonstrate underlying revenue resilience, supported by steady economic activity and compliance levels. Total Net GST revenue in December 2025 stood at Rs. 1.45 lakh crore (US$ 16.17 billion), reflecting normal month-on-month variation. On a cumulative basis, net yearly GST collections in December 2025 reached Rs. 14.25 lakh crore (US$ 163.59 billion), registering a year-on-year growth of 6.8%, underscoring sustained consumption momentum and the strengthening tax base.
  • Passengers carried by domestic airlines during January-November 2025 were 1526.35 lakhs as against 1464.02 lakhs during the corresponding period of the previous year, thereby registering an annual growth of 4.26% and a monthly growth of 6.92%.
  • The government is focusing on renewable energy sources and has achieved a major clean energy milestone by generating 50% of its power from renewable sources, five years ahead of its 2030 target. India is committed to achieving the country’s ambition of Net Zero Emissions by 2070 through a five-pronged strategy, ‘Panchamrit’. Moreover, India ranked 3rd in the renewable energy country attractive index.
  • India secured 38th position out of 139 economies in the Global Innovation Index 2025. India rose from 81st position in 2015 to 38th position in 2024. India ranks in 3rd position in the global number of scientific publications.
  • India’s industrial activity witnessed a strong rebound in November 2025, with the Index of Industrial Production (IIP) growing by 6.7%, a sharp improvement from 0.4% in October 2025, indicating accelerating industrial momentum. The manufacturing sector led this expansion with a robust 8.0% growth, supported by positive performance across 20 out of 23 industry groups at the NIC two-digit level, reflecting a broad-based recovery. Key growth drivers included basic metals (10.2%), pharmaceuticals and medicinal products (10.5%), and motor vehicles and trailers (11.9%), highlighting strength in core, healthcare, and mobility-related industries. Overall, the IIP index rose to 158.0, up from 148.1 in November 2024, underscoring sustained expansion in India’s industrial base.
  • The government has set a calibrated wheat procurement target of 30 million tonnes for the 2025–26 rabi marketing season, ensuring efficient stock management and smooth market operations. This comes even as wheat production is projected at a record 115 million tonnes in 2024–25, reflecting strong output prospects. To support farmers, the MSP for wheat has been fixed at Rs. 2,425 per quintal, with procurement to be undertaken by FCI and state agencies to meet food security and welfare requirements.