The government said India’s real GDP growth accelerated to 8.2% in the second quarter of FY26, rising from 7.8% in the previous quarter and 7.4% in the last quarter of FY25. It said this marked a six-quarter high, achieved despite global trade disruptions and policy uncertainties, with domestic consumption driving much of the expansion.
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According to the government, inflation softened sharply through the year while unemployment fell to multi-month lows, creating what it described as a “goldilocks period” of strong growth with price stability.Growth momentum strengthensThe government said gross value added expanded 8.1% in Q2 FY26, led by robust performance in industry and services. It added that private consumption remained resilient and continued to anchor domestic demand.
Highlighting India’s broader economic positioning, the government said the country, with a GDP of $4.18 trillion, had overtaken Japan to become the world’s fourth-largest economy and was on track to surpass Germany within the next three years. It said GDP was projected to reach $7.3 trillion by 2030.
The government said high-frequency indicators reinforced the strength of economic activity, pointing to easing inflation, declining unemployment, improving exports and benign financial conditions supported by strong credit growth and rising urban consumption.
It said the Reserve Bank of India had upgraded its GDP growth forecast for FY26 to 7.3% from 6.8%, citing robust domestic demand, GST and income tax rationalisation, softer crude oil prices, front-loaded government capital expenditure and supportive monetary conditions.
Looking ahead, the government said favourable agricultural prospects, strong corporate and banking balance sheets, low inflation and sustained reform momentum were expected to keep growth on track, while services exports and trade negotiations offered additional upside.Unemployment declines to multi-month lowsThe government said employment outcomes improved significantly through 2025, reflecting stronger absorption of labour as economic activity picked up. It said unemployment trends mirrored growth momentum, reinforcing the link between expansion and job creation.
Citing data from the Periodic Labour Force Survey, the government said the unemployment rate for persons aged 15 years and above declined to 4.8% in November 2025 from 5.4% in October, the lowest since April 2025.
It said the decline was led by falling unemployment among women, with the rate among urban women easing to 9.3% from 9.7% and among rural women to 3.4% from 4.0%. Overall rural unemployment fell to 3.9%, while the urban rate declined to 6.5%.
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It also pointed to rising labour force participation and worker population ratios as signs of a strengthening labour market. It said the labour force participation rate rose to a seven-month high of 55.8% in November, while the worker population ratio improved to 53.2%, up from 51.2% in June.
These trends, the government said, reflected gains in rural employment, rising female participation and a gradual recovery in urban labour demand.
Inflation softens sharplyThe government said 2025 witnessed a benign inflation environment, with headline CPI easing steadily through the year. It said inflation fell from 4.26% in January to 2.10% in June and dropped to historic lows of around 0.25% in October, before edging up to 0.71% in November.
It attributed the faster-than-expected decline largely to corrections in food prices, which ran counter to typical seasonal trends.
The government said the RBI had lowered its CPI inflation forecast for FY26 to 2.0% from 2.6%, comfortably within the central bank’s tolerance band. It added that the projected inflation path showed continued moderation into FY27.
In this backdrop, the government said the RBI reduced the policy repo rate by 25 basis points to 5.25%, signalling a balanced approach to growth and inflation amid benign price conditions.
Wholesale inflation also moderated during the year, the government said, with WPI inflation slipping to a provisional negative reading of 0.32% in November after starting the year at 2.31%.
Trade and external sector improveThe government said India’s trade performance strengthened through 2025, with total exports starting the year at $74.97 billion in January and maintaining steady growth through the year. Merchandise exports rose from $36.43 billion in January to $38.13 billion in November, supported by engineering goods, electronics, pharmaceuticals, gems and jewellery, and petroleum products.
It said strong growth was recorded in exports of cashew, marine products, other cereals, electronic goods, engineering goods and petroleum products.
Services exports continued to be a key pillar, the government said, expanding 8.65% to $270.06 billion during April–November 2025, driven by computer and business services.
The government said India broadened its export footprint by strengthening trade ties with countries including the UK, Oman and New Zealand, while also expanding trade with China, the UAE, Germany, France, Australia and others.
On the external front, the government said foreign exchange reserves stood at $686.2 billion as of late November, providing import cover of over 11 months.
It said the current account deficit narrowed to 1.3% of GDP in Q2 FY26 from 2.2% a year earlier, supported by strong services exports and a 10.7% rise in remittances.
Foreign direct investment flows strengthened in the first half of the year, the government said, with gross FDI rising 19.4% and net FDI more than doubling, helped by lower repatriation. Portfolio flows, however, saw modest net outflows amid equity market volatility.
Global institutions upgrade outlookThe government said India’s growth outlook continued to draw confidence from global institutions. It cited projections from the World Bank, IMF, OECD, Moody’s, S&P, Fitch and the Asian Development Bank, all of which forecast India to remain among the fastest-growing major economies over the next two years.
Taken together, the government said strong domestic demand, easing inflation, improving employment and resilient external balances placed India on a stable path towards its long-term development goals leading up to 2047.