RBI ANNUAL REPORT 2025-26
CHAPTER II: ECONOMIC REVIEW
PART 1: COMPLETE
REVISION NOTE
II.1 OVERALL ASSESSMENT
Global growth
remained resilient at 3.4% in 2025 despite trade and geopolitical uncertainty,
supported by technology investment, accommodative financial conditions and
front-loaded trade. Global inflation fell to 4.1% from 5.8%; global trade
volume rose to 5.1% from 3.6%. Risks intensified in 2026 from West Asia
conflict, energy prices, trade restrictions, debt and valuation concerns.
India remained
robust in 2025-26, supported by domestic demand, investment, buoyant services
and improving industry. Headline inflation moderated sharply, deposits and
credit grew at double digits, fiscal consolidation continued with emphasis on
capital spending, and the external sector remained resilient with sustainable
CAD and adequate forex reserves.
II.2 THE REAL ECONOMY
Growth and aggregate
demand
Real GDP growth
accelerated to 7.6% in 2025-26 from 7.1% in 2024-25. Consumption and investment
strengthened; net exports caused only a 0.1 percentage-point drag despite
higher US tariffs. Private final consumption expenditure grew 7.7%; government
final consumption 6.6%; gross fixed capital formation 7.1%.
|
Component |
2023-24 |
2024-25 |
2025-26 |
|
Total consumption expenditure |
4.9 |
5.9 |
7.5 |
|
Private final consumption |
5.8 |
5.8 |
7.7 |
|
Government final consumption |
0.6 |
6.5 |
6.6 |
|
Gross capital formation |
8.7 |
6.1 |
6.5 |
|
Gross fixed capital formation |
7.3 |
6.4 |
7.1 |
|
Exports |
0.7 |
6.6 |
6.5 |
|
Imports |
-1.0 |
5.3 |
6.4 |
|
Real GDP |
7.2 |
7.1 |
7.6 |
Rural
consumption remained steady and urban demand improved, partly associated with
income-tax cuts. Government final consumption expenditure also remained
supportive.
Investment, saving and
household finance
Gross domestic
investment rate remained broadly stable at 34.3% in 2024-25. Public investment
continued to play a counter-cyclical role and helped crowd in private
investment. The saving-investment gap narrowed in 2024-25, indicating lower
dependence on external resources. Households remained the primary net supplier
of funds.
Household gross
financial saving was 11.8% of GNDI in 2024-25; financial liabilities fell to
4.8%, raising net financial saving to 7.0%. Deposits remained an important
saving instrument, alongside provident/pension funds and insurance.
Aggregate supply and
agriculture
Real GVA at
basic prices grew 7.7% in 2025-26. Agriculture and allied activities moderated
to 2.4% from 4.2%, mainly because of weather-related kharif disruptions,
although favourable rabi conditions, above-normal rainfall and high reservoir
levels provided support. Reservoir levels reached 91.4% of full capacity on
October 9, 2025.
Foodgrain
production was estimated at a record level. Kharif rice, wheat, maize, kharif
groundnut, rapeseed and mustard were among the major crops supporting output.
Horticultural production also reached a record, driven by banana, tomato and
plantation crops.
|
Real GVA sector |
2024-25 |
2025-26 |
cue |
|
Agriculture, livestock, forestry & fishing |
4.2% |
2.4% |
Moderation |
|
Industry |
8.7% |
9.5% |
Manufacturing-led |
|
Manufacturing |
9.3% |
11.5% |
Strongest major industrial component |
|
Services |
7.8% |
8.7% |
Main growth engine |
|
GVA at basic prices |
7.3% |
7.7% |
Above GDP growth |
MSPs for 2025-26
were increased 1.0-13.9% for kharif and 4.0-10.1% for rabi. Ragi recorded the
highest kharif increase; safflower the highest rabi increase. Government
foodgrain stock was more than four times the buffer requirement;
wheat/wheat-product export restrictions were partially relaxed. El Niño risk
for the next kharif season requires monitoring.
Industrial sector
Industrial
activity strengthened through mining and manufacturing. Sixteen of 23
manufacturing industry groups recorded expansion in 2025-26. Renewable energy
including large hydro grew 18.4% y-o-y in 2025-26 and India’s non-fossil
installed capacity crossed the 2030 target trajectory early. Manufacturing
capacity utilisation increased to 75.6% in Q3:2025-26.
Private-sector
fixed investment growth recovered to 11.5% in 2025-26, supported by metals,
construction and automobiles. PLI-linked investment had generated substantial
production/sales and employment, and capacity utilisation/new orders indicated
strengthening demand.
Services sector and
employment
Services growth
strengthened to 8.7%, with broad-based expansion in trade, transport,
financial, real-estate, IT and professional services. Vehicle registrations,
air cargo, port cargo, railway freight and GST e-way bills generally improved.
Construction showed mixed trends, with moderating steel consumption but
improving cement production.
Employment
conditions remained steady in 2025. Labour force participation and
worker-population ratios remained high, while unemployment moderated. Salaried
and casual employment shares increased and self-employment share declined.
Recent labour reforms aim at greater labour-market flexibility, lower
compliance burden, universal social security, statutory minimum wages and
stronger health/safety provisions.
ALERT: GDP 2025-26 = 7.6%;
manufacturing GVA = 11.5%; services GVA = 8.7%; agriculture GVA = 2.4%. Keep
actual growth rates distinct from projections.
II.3 PRICE SITUATION
Headline inflation and
CPI revision
Headline CPI
inflation averaged 2.1% in 2025-26, a sharp moderation aided by food deflation
and favourable base effects. GST rationalisation/simplification in September
2025 also limited price pressures. Core inflation, CPI excluding food and fuel,
faced upward pressure from precious metals, especially gold and silver; towards
year-end, LPG price increases pushed up fuel-related inflation.
MoSPI released a
new CPI series with base 2024=100 on February 12, 2026. It follows UN COICOP
2018 and uses weights from HCES 2023-24. The earlier six groups were
reorganised into 12 divisions. Food and beverages weight fell from 45.9% to
36.8%. Housing and fuel/light were reorganised into a combined housing, water,
electricity, gas and other fuels division; transport and communication were
split into transport and information/communication.
|
CPI item |
Old base 2012=100 |
New base 2024=100 |
|
Food & beverages |
45.9% |
36.8% |
|
Pan, tobacco & intoxicants |
2.4% |
3.0% |
|
Clothing & footwear |
6.5% |
6.4% |
|
Housing / housing-related |
Housing 10.1%; fuel & light 6.8% |
Housing, water, electricity, gas & other fuels 17.7% |
|
Education |
4.5% |
Education services 3.3% |
|
Health |
5.9% |
6.1% |
|
Transport / communication |
8.6% combined |
Transport 8.8%; information & communication 3.6% |
|
Restaurants & accommodation |
Not separate |
3.3% |
Because
methodology, sample size, collection techniques and weights changed, CPI
inflation before/after the series break is not strictly comparable. Up to
December 2025 the old series is used in the chapter; subsequent months use the
2024=100 series.
Food inflation
Food and
beverages prices contracted 0.8% during April-December 2025, versus 7.6%
inflation a year earlier. Food inflation fell from a peak of 9.7% in October
2024. Vegetable inflation was unusually weak because of robust arrivals and
production. Onion prices were especially subdued, supported by higher
production in 2024-25 and government retail interventions.
Pulse inflation
moderated for 17 consecutive months up to October 2025 amid better arhar/urad
availability and retail sales of Bharat Dal. Cereals recorded 0.2% inflation
during April-December 2025 versus 7.6% a year earlier. Fruits and oils/fats
recorded upward pressure; lower coconut production in 2024-25 contributed to
higher coconut prices.
Fuel, core and other
inflation
Fuel-related
inflation remained subdued for most of the year, but LPG price increases and
West Asia tensions created late-year pressure. Precious metals were the
principal driver of core inflation. Excluding gold and silver, core inflation
remained benign, helped by GST-led price corrections, lower cotton prices and
subdued textile export demand.
CPI-IW inflation
moderated to 3.1% from 3.4%. WPI inflation moderated to 0.7% from 2.3%, driven
by deflation in primary articles and fuel/power. WPI primary articles recorded
-1.1%; fuel and power -2.9%; manufactured products 2.3%. GDP-deflator inflation
declined to 0.9% during April-December 2025 from 2.5%.
MSP increases in
2025-26 were 1.0-13.9% for kharif and 4.0-10.1% for rabi. The inflation outlook
remained vulnerable to geopolitical conflict, energy/input costs, exchange-rate
movements, trade policy and weather/El Niño risks.
ALERT: 2.1% is the headline CPI
average for 2025-26. New CPI base = 2024=100, released February 12, 2026. Food
weight = 36.8%, not the old 45.9%.
II.4 MONEY AND CREDIT
Reserve money and RBI
balance sheet
The Reserve Bank
balance sheet expanded mainly because of revaluation gains from elevated gold
prices and rupee depreciation. End-March 2026 balance-sheet size was 26.4% of
GDP, versus 23.7% a year earlier.
CRR was reduced
by 100 bps to 3.0% of NDTL in four equal 25-bps tranches, effective from the
fortnights beginning September 6, October 4, November 1 and November 29, 2025.
Reserve money growth adjusted for the first-round CRR effect accelerated to
10.8% from 5.8%. Currency in circulation, 81.4% of reserve money, grew 11.4%
versus 5.8%. Bankers’ deposits with RBI fell 18.2% because of the CRR
reduction.
Retail digital
payments grew 15.1% in value and 26.9% in volume. Net foreign assets of RBI
increased; the gold share in NFA rose to 17.2% from 12.0%, mainly due to
gold-price revaluation. RBI net credit to government expanded through G-sec
purchases.
Money supply and
monetary ratios
Broad money M3
grew 13.0% as on March 31, 2026 versus 9.4%. Aggregate deposits, 86.6% of M3,
remained the largest component; time-deposit growth was 10.6% versus 9.8%.
Currency with the public grew 11.4%. On the asset side, bank credit to
commercial sector grew 15.7%, net bank credit to government 9.1%, and net
foreign assets of the banking sector also increased.
Currency-deposit
ratio declined from 15.4% to 14.9%, reflecting greater digital-payment usage.
Lower currency-deposit and reserve-deposit ratios improved the money multiplier
to 6.1 from 5.7.
|
Indicator |
2024-25 |
2025-26 |
|
Adjusted reserve money growth |
5.8% |
10.8% |
|
Currency in circulation growth |
5.8% |
11.4% |
|
M3 growth |
9.4% |
13.0% |
|
Bank credit to commercial sector |
10.8% |
15.7% |
|
Net bank credit to government |
10.5% |
9.1% |
|
Currency-deposit ratio |
15.4% |
14.9% |
|
Money multiplier |
5.7 |
6.1 |
|
Gold share in RBI NFA |
12.0% |
17.2% |
Bank credit and
deposits
Bank credit grew
at double digits, led by services and retail. PSBs recorded higher credit
growth than PVBs for the second consecutive year, increasing PSBs’ share in
total credit. Overall SCB non-food credit growth was 15.9% at end-March 2026.
|
Credit segment |
Growth at end-March 2026 |
|
Non-food credit |
15.9% |
|
Agriculture & allied |
15.7% |
|
Industry |
15.0% |
|
Micro & small |
33.1% |
|
Medium |
21.7% |
|
Large |
8.9% |
|
Infrastructure |
9.5% |
|
Basic metals & metal products |
19.4% |
|
Chemicals & chemical products |
14.9% |
|
Textiles |
8.9% |
|
All engineering |
32.2% |
|
Services |
19.0% |
|
Trade |
16.2% |
|
Commercial real estate |
19.9% |
|
NBFCs |
26.3% |
|
Personal loans |
16.2% |
|
Housing |
11.5% |
|
Vehicle loans |
18.6% |
|
Loans against gold jewellery |
123.1% |
|
Other personal loans |
13.0% |
Deposit growth
remained below credit growth, leaving a persistent funding wedge and elevated
incremental credit-deposit ratio. Banks relied more on certificates of deposit.
Total financial resources to the commercial sector increased to ₹47.0 lakh
crore in 2025-26 from ₹36.2 lakh crore; total outstanding credit to the
commercial sector grew 15.0%, while non-bank sources grew 13.3%.
Box II.4.1:
During 2020-21 to 2024-25, average bank time-deposit growth was 10.7%; debt
mutual-fund AUM growth 5.3%; equity mutual-fund AUM growth 32.4%. The study
found bank time deposits and debt mutual funds to be complementary avenues
under both surplus and deficit liquidity regimes; no statistically significant
relationship was found between bank time deposits and equity mutual-fund flows.
ALERT: Do not confuse 15.9%
non-food credit growth with 15.7% bank credit to commercial sector growth.
Loans against gold jewellery grew 123.1%, the unusual figure likely to attract
an MCQ.
II.5 FINANCIAL MARKETS
Money market
Money-market
rates moved with the repo rate and liquidity. WACR averaged 7 bps below repo in
2025-26 versus 6 bps above repo in 2024-25. WACR volatility, measured by
coefficient of variation, increased to 4.8% from 2.2%. Surplus liquidity kept
WACR near the SDF rate in April-early July; VRRR absorption moved it closer to
repo from mid-July; reduced surplus pushed WACR towards MSF in mid-December
2025-January 2026.
Average daily
money-market volume rose 16% to ₹6.4 lakh crore from ₹5.5 lakh crore. From July
1/August 1, 2025, trading hours were extended to 7 pm for call money and 4 pm
for triparty repo/market repo. Collateralised segments dominated, with average
shares around 67% triparty repo and 30% market repo; call money was about 3%.
CD issuances
rose to ₹5.3 lakh crore in Q4 from ₹2.3 lakh crore in Q1; annual CD issuances
were ₹13.5 lakh crore. CP issuances increased to ₹16.9 lakh crore from ₹15.7
lakh crore, although H2 saw a shift towards bank borrowing as rates rose.
Government securities
and debt investment
G-sec yields
softened in Q1 amid easing/liquidity support, then hardened as the MPC moved to
a neutral stance and rate-cut expectations faded. Q3 saw two-way movement; RBI
liquidity injections moderated upward pressure. In Q4, higher planned borrowing
and the Middle East conflict/crude-oil surge hardened yields. The 10-year
generic G-sec yield crossed 7% on the final trading session of 2025-26, first
time since July 2024.
OMO purchases
were ₹2.39 lakh crore in Q1, ₹1.81 lakh crore in Q3 and ₹4.57 lakh crore in Q4,
based on the chapter’s quarterly reporting. FPIs invested ₹2.16 lakh crore in
debt instruments in 2025-26 across general, VRR and FAR channels.
|
FPI debt route |
Limit / utilisation at end-March 2026 |
|
General route |
₹1,470.7 thousand crore limit; 12.7% utilisation |
|
VRR |
₹2,500.0 thousand crore limit; 75.5% utilisation |
|
FAR |
₹47,512.0 thousand crore limit; 6.6% utilisation |
Corporate bonds
AAA-rated 3-year
corporate bond yields declined between March 2025 and March 2026, but spreads
hardened during the year amid mixed corporate earnings. Secondary-market
corporate-bond turnover increased to ₹7.1 thousand crore from ₹6.2 thousand
crore. Domestic listed corporate-bond primary issuances declined to ₹9.1 lakh
crore from ₹9.9 lakh crore. Private placements accounted for 99% of resources
mobilised through the domestic bond market.
|
AAA 3-year issuer |
March 2025 |
March 2026 |
Change |
|
PSUs, FIs & banks |
7.48% |
7.33% |
-15 bps |
|
NBFCs |
7.70% |
7.53% |
-17 bps |
|
Corporates |
7.62% |
7.38% |
-24 bps |
Equity market and
resource mobilisation
Indian equities
moved in both directions. Supportive fiscal/monetary conditions and strong GDP
supported the first half; geopolitical tensions and AI-related concerns weighed
in the second half. BSE Sensex fell 7.1% to 71,948 at end-March 2026. BSE 150 Midcap
fell 1.0%; BSE 250 SmallCap fell 6.5%. FPIs recorded net equity sales of ₹2.7
lakh crore; DIIs recorded net purchases of ₹8.5 lakh crore.
QIPs and
preferential allotments mobilised ₹2.2 lakh crore, broadly unchanged. IPOs,
FPOs and rights issues mobilised ₹2.3 lakh crore versus ₹2.1 lakh crore.
Average monthly SIP contribution rose to ₹29.1 thousand crore from ₹24.1
thousand crore.
Foreign exchange market
The INR
depreciated 9.9% during 2025-26. It reached the year’s high of ₹83.75 per US$
on May 2, 2025, then weakened under geopolitical/tariff concerns and FPI
outflows. H1 closed at ₹88.79 per US$, down 3.8%. H2 closed at ₹94.83 per US$,
down 6.4%. Forward premia were range-bound till November, then increased and
remained elevated. 40-currency NEER and REER depreciated 6.9% and 7.5%,
respectively.
ALERT: Financial-market memory
set: WACR = repo-linked; money-market volume = ₹6.4 lakh crore; Sensex
end-March = 71,948; INR depreciation = 9.9%; H2 close = ₹94.83/US$.
II.6 GOVERNMENT
FINANCES
Centre: 2025-26
The Centre
maintained post-pandemic fiscal consolidation. GFD was 4.4% of GDP in 2025-26
RE versus 4.8% in 2024-25. Higher non-tax revenue and expenditure
rationalisation supported consolidation. Revenue expenditure rose 7.4%; major
subsidies exceeded budget by ₹46,327 crore, mainly due to food and fertiliser
subsidies. Capital expenditure remained 3.1% of GDP; effective capital
expenditure was 3.9%.
Gross tax
revenue grew 7.4% to 11.4% of GDP. Net tax revenue grew 7.0%. Non-tax revenue
grew 24.4% and exceeded BE by ₹84,662 crore. Non-debt capital receipts grew
53.1%. Total non-debt receipts grew 10.7%.
|
Central fiscal indicator |
2024-25 |
2025-26 RE |
2026-27 BE |
|
Non-debt total receipts |
₹30.8 lakh cr |
₹34.1 lakh cr |
₹36.5 lakh cr |
|
Gross tax revenue |
₹38.0 lakh cr |
₹40.8 lakh cr |
₹44.0 lakh cr |
|
Direct tax |
₹22.2 lakh cr |
₹24.2 lakh cr |
₹27.0 lakh cr |
|
Indirect tax |
₹18.7 lakh cr |
₹18.6 lakh cr |
₹17.4 lakh cr |
|
Net tax revenue |
₹25.0 lakh cr |
₹26.7 lakh cr |
₹29.7 lakh cr |
|
Non-tax revenue |
₹5.4 lakh cr |
₹6.7 lakh cr |
₹6.7 lakh cr |
|
Total expenditure |
₹45.0 lakh cr |
₹49.6 lakh cr |
₹53.5 lakh cr |
|
Revenue expenditure |
₹36.0 lakh cr |
₹39.7 lakh cr |
₹41.3 lakh cr |
|
Capital expenditure |
₹10.5 lakh cr |
₹10.0 lakh cr |
₹12.2 lakh cr |
|
Revenue deficit |
₹5.6 lakh cr |
₹5.3 lakh cr |
₹5.9 lakh cr |
|
GFD |
₹18.7 lakh cr |
₹18.6 lakh cr |
₹17.0 lakh cr |
Centre: 2026-27
GFD is budgeted
at 4.3% of GDP. Centre debt-to-GDP is budgeted at 55.6%, down from 56.1% in
2025-26 RE. Capital expenditure is budgeted to grow 11.5%. Gross tax revenue is
11.2% of GDP; indirect taxes 4.3%, partly reflecting discontinuation of GST
compensation cess from February 1, 2026.
Gross market
borrowings are budgeted at ₹17.2 lakh crore and net market borrowings at ₹11.7
lakh crore, equal to 3.0% of GDP. Market borrowings and small savings remain
major financing sources.
States and general
government
States had
budgeted GFD at 3.3% of GDP in 2025-26. For 22 states with provisional data
through February, GFD reached 77.1% of budget estimates versus 64.3% a year
earlier, reflecting weaker revenue, especially SGST, and lower grants from the
Centre. Revenue expenditure grew more slowly while capital expenditure remained
strong.
For 2026-27, 24
states/UTs budgeted consolidated GFD at 3.0% of GSDP. Gross transfers to states
are budgeted to rise 12.2%. The 50-year interest-free loan scheme for capital
expenditure continues with ₹2 lakh crore, up 33.3%.
Sixteenth
Finance Commission, 2026-27 to 2030-31, retains states’ share at 41% of the
divisible tax pool. Horizontal devolution gives greater weight to population;
area, income distance and demographic performance weights were reduced; forest
cover retained; tax effort removed; a new 10% criterion for states’
contribution to GDP introduced. Post-devolution revenue-deficit grants are
discontinued.
|
FC-XVI horizontal devolution criterion |
Weight |
|
Population |
17.5% |
|
Area |
10% |
|
Forest cover |
10% |
|
Income distance |
42.5% |
|
Demographic performance |
10% |
|
Contribution to GDP |
10% |
|
Tax effort |
Removed |
General
government GFD moderated to 7.2% of GDP in 2025-26 BE from 7.8% in 2024-25 RE.
General-government debt-to-GDP was budgeted at 81.9%; external liabilities were
2.5% of GDP. Tax revenue rose to 19.1% of GDP from 18.4%, while total
expenditure remained 29.6% of GDP. Capital expenditure was budgeted at 5.8% of
GDP.
ALERT: Fiscal anchors: Centre GFD
4.4% in 2025-26 RE and 4.3% in 2026-27 BE; states 3.0% GFD/GSDP in 2026-27;
FC-XVI states’ divisible tax-pool share = 41%.
II.7 EXTERNAL SECTOR
Global conditions
Global GDP
growth was 3.4% in 2025 and projected at 3.1% in 2026. Global trade volume grew
5.1% in 2025 versus 3.6% in 2024. West Asia conflict, disruption of trade
routes, protectionism and slower travel/transport services cloud the 2026
outlook. Developed-economy FDI inflows increased 43% in 2025, while
developing-economy inflows declined 2%.
Merchandise trade
India’s
merchandise exports grew 0.9% in 2025-26 to US$441.7 billion; imports grew 7.6%
to US$775.0 billion. The merchandise trade deficit widened to US$333.2 billion
from US$282.5 billion.
|
Merchandise trade |
2024-25 |
2025-26 |
Growth 2025-26 |
|
Exports |
US$437.7 bn |
US$441.7 bn |
0.9% |
|
Imports |
US$720.2 bn |
US$775.0 bn |
7.6% |
|
Trade deficit |
US$282.5 bn |
US$333.2 bn |
Widened |
Export growth
was led by electronic goods, engineering goods, meat/dairy/poultry, marine
products and ores/minerals. Petroleum products, gems/jewellery,
plastic/linoleum and cotton/handloom products contracted. Electronic goods were
the fastest-growing major export; mobile phones constituted about 61% of
electronic-goods exports and benefited from US tariff exemption.
Imports were led
by electronic goods, gold and electrical/non-electrical machinery. POL
accounted for 22.4% of merchandise imports; its value declined despite higher
volume because oil prices contracted. China became India’s largest trading
partner in 2025-26, overtaking the US.
Trade agreements and
invisibles
As of April
2026, India had signed 24 trade agreements. CETA with the UK was signed July
24, 2025; CEPA with Oman December 18, 2025; India-New Zealand FTA April 27,
2026. These were yet to be enforced. India-EU FTA negotiations concluded
January 27, 2026.
Net services
exports grew 15.3% y-o-y during April-December 2025, led by software and
business services, which accounted for 77.8% of services exports. Private
transfer receipts grew 10.1%. The average cost of sending US$200 to India was
5.3% in Q3:2025, below the global 6.4% but above the SDG target of 3% by 2030.
Primary-income
net outgo was US$37.2 billion. Strong services receipts and remittances offset
the merchandise deficit. CAD was US$30.2 billion, equal to 1.1% of GDP, during
April-December 2025 versus US$36.7 billion or 1.3% a year earlier.
Capital flows and
external vulnerability
Net capital
flows during April-December 2025 fell short of CAD, reducing forex reserves by
US$30.8 billion on a BoP basis, excluding valuation effects. Net FDI was US$7.7
billion; net FPI was an outflow of US$16.5 billion; net ECB inflow was US$12.0
billion; non-resident deposits recorded US$14.4 billion.
Services
accounted for around 44% of FDI equity flows in 2025-26; major source countries
included Singapore, US, Mauritius, Japan, Netherlands and UAE. India ranked
second globally in greenfield FDI announcements during 2025-26, after the US,
according to fDi Markets.
|
External vulnerability indicator |
End-Dec 2025 / latest in chapter |
|
External debt/GDP |
20.4% |
|
Short-term debt, original maturity / total debt |
19.7% |
|
Short-term debt, residual maturity / total debt |
43.2% |
|
Reserves / total external debt |
89.8% |
|
Short-term debt, original maturity / reserves |
21.9% |
|
Short-term debt, residual maturity / reserves |
48.0% |
|
Import cover |
10.8 months |
|
Debt service ratio |
5.8% |
|
External debt |
US$765.5 bn |
|
NIIP/GDP |
7.4% |
|
CAD/GDP |
1.1% (Apr-Dec 2025) |
The chapter also
notes that end-March 2026 forex reserves provided around nine months of
goods-and-services import cover. External vulnerability remained contained
because of services exports, remittances, ample reserves and moderate external
debt.
OVERALL CHAPTER
TAKEAWAY
The 2025-26
economic picture is one of strong domestic growth with sharply lower headline
inflation, double-digit credit growth, resilient financial markets and
continued fiscal consolidation. The principal vulnerabilities are geopolitical
conflict, energy prices, trade-policy uncertainty, exchange-rate pressure,
external financing conditions and weather/El Niño risks.
PART 2: IMPORTANT
NUMBERS
|
Topic |
Figure |
Context |
|
Global GDP growth |
3.4% |
2025 |
|
Global GDP growth projection |
3.1% |
2026 |
|
Global trade volume |
5.1% |
2025 |
|
India GDP growth |
7.6% |
2025-26 |
|
Private final consumption growth |
7.7% |
2025-26 |
|
Gross fixed capital formation growth |
7.1% |
2025-26 |
|
Net-export drag |
0.1 pp |
2025-26 |
|
Agriculture GVA |
2.4% |
2025-26 |
|
Manufacturing GVA |
11.5% |
2025-26 |
|
Services GVA |
8.7% |
2025-26 |
|
Headline CPI |
2.1% |
2025-26 |
|
Food & beverages CPI weight |
36.8% |
CPI 2024=100 |
|
Old food & beverages weight |
45.9% |
CPI 2012=100 |
|
Adjusted reserve-money growth |
10.8% |
2025-26 |
|
CiC growth |
11.4% |
2025-26 |
|
M3 growth |
13.0% |
Mar 31, 2026 |
|
Bank credit to commercial sector |
15.7% |
2025-26 |
|
Non-food credit |
15.9% |
End-March 2026 |
|
Money multiplier |
6.1 |
Mar 31, 2026 |
|
CRR |
3.0% |
After 100-bps reduction |
|
Money-market daily volume |
₹6.4 lakh cr |
2025-26 |
|
WACR average spread |
-7 bps |
vs repo |
|
Sensex |
71,948 |
End-March 2026 |
|
Sensex change |
-7.1% |
2025-26 |
|
INR depreciation |
9.9% |
2025-26 |
|
INR H2 close |
₹94.83/US$ |
End-March 2026 |
|
Centre GFD |
4.4% GDP |
2025-26 RE |
|
Centre GFD |
4.3% GDP |
2026-27 BE |
|
Centre debt/GDP |
55.6% |
2026-27 BE |
|
Gross market borrowing |
₹17.2 lakh cr |
2026-27 BE |
|
State GFD |
3.0% GSDP |
2026-27 BE |
|
FC-XVI divisible tax share |
41% |
States |
|
Trade deficit |
US$333.2 bn |
2025-26 |
|
CAD |
US$30.2 bn / 1.1% GDP |
Apr-Dec 2025 |
|
Net FPI |
-US$16.5 bn |
2025-26 |
|
Net FDI |
US$7.7 bn |
2025-26 |
|
Forex reserve depletion |
US$30.8 bn |
BoP, Apr-Dec 2025 |
|
External debt |
US$765.5 bn |
End-Dec 2025 |
|
Import cover |
10.8 months |
End-Dec 2025 |
PART 3: IMPORTANT DATES
|
Date / period |
Event / fact |
|
February 12, 2026 |
New CPI series, base 2024=100, released by MoSPI |
|
September 6, 2025 |
First 25-bps CRR reduction tranche |
|
October 4, 2025 |
Second 25-bps CRR reduction tranche |
|
November 1, 2025 |
Third 25-bps CRR reduction tranche |
|
November 29, 2025 |
Fourth 25-bps CRR reduction tranche |
|
July 1, 2025 |
Call-money market trading hours extended to 7 pm |
|
August 1, 2025 |
Triparty repo/market repo trading hours extended to 4 pm |
|
July 24, 2025 |
India-UK CETA signed |
|
December 18, 2025 |
India-Oman CEPA signed |
|
January 27, 2026 |
India-EU FTA negotiations concluded |
|
April 27, 2026 |
India-New Zealand FTA signed |
|
February 28, 2026 |
West Asia conflict escalation triggered major March FPI outflows |
|
March 31, 2026 |
End of financial year; key monetary/market data reference |
|
April 2026 |
End-March reserve position and 2026-27 fiscal outlook assessed |
PART 4: IMPORTANT RBI /
GOI / OTHER INITIATIVES
|
Initiative / measure |
Organisation |
Purpose / key fact |
|
CRR reduction |
RBI |
100 bps total, to 3.0%, in four 25-bps tranches |
|
OMO purchases |
RBI |
Liquidity support and moderation of G-sec yield pressure |
|
VRRR operations |
RBI |
Absorb surplus liquidity and align overnight rates |
|
PLI-linked manufacturing support |
GoI |
Investment/production support in manufacturing |
|
GST rationalisation |
GoI |
September 2025 rate rationalisation helped limit price pressures |
|
Bharat Dal retail sales |
GoI |
Supply management for pulses |
|
MSP increases |
GoI |
Kharif +1.0-13.9%; rabi +4.0-10.1% |
|
India-UK CETA |
GoI |
Trade diversification, signed July 24, 2025 |
|
India-Oman CEPA |
GoI |
Trade diversification, signed Dec 18, 2025 |
|
India-New Zealand FTA |
GoI |
Trade diversification, signed Apr 27, 2026 |
|
Sixteenth Finance Commission |
GoI / FC |
41% divisible tax-pool share; new 10% GDP-contribution criterion |
|
50-year interest-free capital loans to states |
GoI |
₹2 lakh crore outlay in 2026-27 |
|
New CPI 2024=100 |
MoSPI |
12 divisions; weights from HCES 2023-24 |
PART 5: KEY DEFINITIONS
/ CONCEPTS
|
Term |
Concise meaning |
|
Real GDP growth |
Growth in GDP at constant prices; chapter reports 7.6% in 2025-26. |
|
Gross fixed capital formation |
Investment in fixed assets; grew 7.1% in 2025-26. |
|
GVA at basic prices |
Value added by sectors before product taxes/subsidies adjustment to
GDP. |
|
Headline CPI |
Overall consumer-price inflation measure. |
|
Core inflation |
CPI excluding food and fuel, as used in the chapter. |
|
Reserve money |
Stock of monetary liabilities of the central bank; includes CiC and
bankers’ deposits among major components. |
|
M3 / broad money |
Currency with public plus aggregate bank deposits, the chapter’s
broad-money measure. |
|
Money multiplier |
Ratio linking broad money to reserve money; rose to 6.1. |
|
WACR |
Weighted Average Call Rate, key overnight money-market rate. |
|
SDF |
Standing Deposit Facility, floor of the policy corridor for absorbing
liquidity. |
|
MSF |
Marginal Standing Facility, ceiling of the policy corridor. |
|
VRRR |
Variable Rate Reverse Repo, used to absorb surplus liquidity. |
|
OMO |
Open Market Operations, RBI purchase/sale of government securities. |
|
FAR |
Fully Accessible Route for specified central government securities,
open to non-resident investors without investment restrictions applicable
under ordinary routes. |
|
CAD |
Current account deficit, current-account shortfall financed through
capital/financial flows and reserves. |
|
NEER |
Nominal Effective Exchange Rate, trade-weighted nominal exchange-rate
index. |
|
REER |
Real Effective Exchange Rate, trade-weighted exchange rate adjusted
for relative prices. |
|
GFD |
Gross fiscal deficit, government’s borrowing requirement from fiscal
operations. |
|
Revenue deficit |
Excess of revenue expenditure over revenue receipts. |
|
Primary deficit |
Fiscal deficit excluding interest payments. |
|
Horizontal devolution |
Distribution of states’ share across states using Finance Commission
criteria. |
|
NIIP |
Net International Investment Position, external assets minus external
liabilities. |
|
Debt service ratio |
Debt-service payments relative to current receipts. |
PART 6: CONFUSION
POINTS
|
Confusion |
Correct distinction |
|
7.6% vs 6.9% |
2025-26 GDP growth vs 2026-27 projection |
|
2.1% vs 0.7% |
Headline CPI
inflation vs WPI inflation in 2025-26 |
|
15.7% vs 15.9% |
Bank credit to commercial sector vs SCB non-food credit |
|
36.8% vs 45.9% |
Food weight in CPI 2024=100 vs CPI 2012=100 |
|
10.8% vs 13.0% |
Adjusted reserve-money growth vs M3 growth |
|
4.4% vs 4.3% |
Centre GFD 2025-26 RE vs 2026-27 BE |
|
3.0% vs 3.3% |
States’ 2026-27 budgeted GFD/GSDP vs 2025-26 budgeted GFD/GDP |
|
41% vs 10% |
States’ divisible tax-pool share vs new FC-XVI GDP-contribution
criterion |
|
US$333.2 bn vs US$30.2 bn |
Merchandise trade deficit vs CAD, Apr-Dec 2025 |
|
US$16.5 bn vs US$7.7 bn |
Net FPI outflow vs net FDI inflow |
|
₹94.83 vs ₹83.75 |
INR end-H2/end-March level vs year’s high |
|
WACR vs repo |
WACR is the market overnight rate; repo is policy rate |
|
SDF vs MSF |
SDF is corridor floor; MSF is corridor ceiling |
|
NEER vs REER |
REER additionally adjusts for relative price/inflation differences |
PART 7: LAST-MINUTE KEY
FACTS
1. India’s real GDP
growth accelerated to 7.6% in 2025-26 from 7.1% in 2024-25.
2. Net exports
caused only a 0.1 percentage-point drag on 2025-26 growth despite tariff
uncertainty.
3. Private final
consumption grew 7.7%; gross fixed capital formation grew 7.1%.
4. Services GVA
grew 8.7%, manufacturing GVA 11.5%, agriculture/allied GVA 2.4%.
5. Headline CPI
inflation averaged 2.1% in 2025-26.
6. New CPI base
2024=100 was released on February 12, 2026; food weight fell from 45.9% to
36.8%.
7. Food and
beverages recorded -0.8% inflation during April-December 2025.
8. MSP increases:
kharif 1.0-13.9%; rabi 4.0-10.1%; ragi highest kharif increase, safflower
highest rabi increase.
9. CRR was reduced
100 bps to 3.0% through four equal 25-bps tranches.
10. Adjusted
reserve-money growth was 10.8%; CiC growth 11.4%.
11. M3 growth was
13.0% as on March 31, 2026.
12. Money multiplier
improved from 5.7 to 6.1.
13. Non-food credit
grew 15.9%; bank credit to commercial sector grew 15.7%.
14. Micro &
small industry credit grew 33.1%; all-engineering 32.2%; NBFC credit 26.3%.
15. Loans against
gold jewellery grew 123.1%.
16. Deposit growth
remained below credit growth, creating a persistent funding wedge.
17. Money-market
average daily volume increased 16% to ₹6.4 lakh crore.
18. WACR averaged 7
bps below repo; collateralised segments dominated the money market.
19. Sensex fell 7.1%
to 71,948 at end-March 2026.
20. INR depreciated
9.9% in 2025-26; H2 closed at ₹94.83/US$.
21. Centre GFD was
4.4% of GDP in 2025-26 RE and budgeted at 4.3% in 2026-27.
22. Centre gross
market borrowing for 2026-27 is ₹17.2 lakh crore; net borrowing ₹11.7 lakh
crore.
23. FC-XVI retains
states’ share at 41% of the divisible tax pool and introduces 10% weight for
states’ contribution to GDP.
24. India’s
merchandise trade deficit widened to US$333.2 billion in 2025-26.
25. CAD was US$30.2
billion, 1.1% of GDP, during April-December 2025.
26. Net FPI outflow
was US$16.5 billion; net FDI inflow was US$7.7 billion.
27. Forex reserves
fell US$30.8 billion on a BoP basis during April-December 2025, excluding
valuation effects.
28. End-December
2025 external debt was US$765.5 billion; reserves covered 10.8 months of
imports.
29. China became
India’s largest trading partner in 2025-26, overtaking the US.