Indian Economy

Rural and Urban consumption patterns appear to be strengthening further due to high agricultural incomes and increased demand throughout the festive season; indicators such as rising UPI and automobile transactions suggest an overall high level of consumer spending in the economy. India’s external sector also remains strong. Total exports (goods and services) during April–October FY26 grew by 4.8% YoY, with services exports expanding by 9.7%, generating a net services surplus of US$ 118.7 billion. The trade deficit stood at US$ 78.2 billion, while foreign exchange reserves reached US$ 687 billion, providing a comfortable import cover of approximately 11 months. Capital flows remained favourable, with net FDI increasing to US$ 24 billion in April–September FY26 and portfolio inflows showing signs of recovery.

Domestic financial markets have demonstrated resilience. Bank credit growth moderated to 10.4% YoY by September 2025, with personal loans and MSME credit showing robust momentum. Indian equities experienced substantial gains in October 2025, driven by domestic institutional investors, with the combined share of DIIs, retail, and high-net-worth individuals reaching an all-time high of 27.8%. Household financial assets have strengthened, with rising investments in mutual funds and equities, highlighting growing investor confidence. Inflationary pressures have eased sharply, with retail inflation at an all-time low of 0.25% in October 2025, driven by GST cuts and declining food prices. Core inflation remained stable at 4.3%, reflecting balanced demand conditions. Labour market indicators show moderation in headline employment growth but improved skill levels and employability, especially among women, supporting strong hiring sentiment for 2026.

In FY25, the following key indicators highlighted improved performances:

• Retail inflation declined sharply to an all-time low of 0.25% in October 2025, driven by deep food price deflation of 5.0%, reflecting the full pass-through of GST rationalisation, favourable base effects, and improved agricultural supply conditions.
• Core inflation remained stable at 4.3%, indicating balanced demand conditions and limited underlying price pressures in the economy.
• Agricultural activity strengthened significantly, with Rabi sowing area rising by 14.8% YoY to 22.97 million hectares as of November 21, 2025. Wheat and gram acreage expanded by 19.9% and 8.9%, respectively, supported by above-average reservoir levels and adequate soil moisture.
• During April–October FY26, India’s total exports (goods and services) increased by 4.8% YoY to US$ 491.8 billion, with services exports growing by 9.7% YoY and generating a net services surplus of US$ 118.7 billion, providing resilience to the external sector.
• Net FDI inflows rose to US$ 24 billion during April–September FY26, supported by higher gross inflows and moderation in repatriations, reflecting sustained investor confidence in India’s long-term growth prospects.
• Foreign exchange reserves stood at US$ 687 billion as of November 7, 2025, offering an import cover of around 11 months and covering nearly 92% of India’s external debt, strengthening external sector stability.
• The Indian rupee traded within a narrow band of 87.8–88.8 per US dollar in October 2025, reflecting limited volatility amid stable portfolio flows and proactive liquidity management by the RBI.
• Bank credit growth moderated to 10.4% YoY as of September 2025, with personal loans growing by 11.7% YoY, driven primarily by a sharp increase in loans against gold, while MSME credit expanded by 19.7% YoY, highlighting sustained support to productive sectors.
• Domestic equity markets witnessed strong participation from domestic institutional investors, with DIIs’ shareholding rising to an all-time high of 18.3% in Q2 FY26, surpassing FIIs, whose share declined to a 13-year low of 16.7%.
• Household financial health improved further, with net financial assets rising to 6.0% of GDP in FY25, supported by reduced household liabilities and a sharp increase in investments in mutual funds and equities, indicating growing financialisation of savings.
• The average daily value of UPI transactions increased by 16.1 percent YoY in October 2025, and this momentum sustained beyond the festive period.
• In October 2025, the tractor sales reached the highest level for any month in the past eleven years, supported by favourable monsoon conditions, improved rural sentiment, festive demand, and the recent GST rate reduction.
• Gold imports have increased by 199.2 percent and silver imports by 528.7 percent (YoY).
• To sustain the momentum in India’s trade performance amidst global uncertainty, the country is actively pursuing a diversified trade strategy. This includes the recently concluded India–UK (CETA) and engagements in FTA negotiations with the EU, US, New Zealand, Chile, and Peru.
• On the portfolio side, October recorded a modest recovery, with net FPI inflows of USD 4 billion, led by a positive shift in equity flows.
• The MSCI World (IMI) Index4 has increased by 1.8 percent (MTD) in October 2025 and achieved a YTD growth of 18.7 percent as of November 14, 2025.
• The India Decoding Jobs Report 2026, a joint report by digital recruitment platform ‘Taggd’ and the Confederation of Indian Industry (CII), estimates a hiring intent of 11 percent in 2026 compared to 9.75 percent in 2025.

India’s retail inflation eased to an all-time low of 0.25 percent in October 2025, down sharply from 1.44 percent in September 2025, marking the lowest reading in the current CPI series. The sharp moderation was driven by pronounced deflation in food prices, which declined by 5.0 percent, reflecting price corrections in vegetables such as tomatoes, onions, and potatoes, along with continued easing in pulses. Core inflation remained stable at 4.3%, indicating steady underlying demand conditions. Taking note of the sustained easing in headline inflation, the Monetary Policy Committee revised its inflation projection for 2025–26 to 2.6%, reflecting confidence in a well-anchored inflation outlook, supported by favourable agricultural conditions.

Labour market indicators pointed to seasonal moderation during the kharif–rabi transition. As per PLFS data, the overall labour force participation rate stood at 55.1 percent in Q2 FY26, with female LFPR rising to 33.7 percent. Employment levels remained robust, with 56.2 crore persons employed during the quarter, reflecting net job creation compared to the previous quarter. The unemployment rate declined to 5.2 percent during July–September 2025. CMIE data corroborated these trends, showing a rise in the unemployment rate to 7.5 percent in October 2025, largely driven by rural dynamics, alongside a labour force participation rate of 41.4 percent, reflecting seasonal shifts in rural employment patterns.

High-frequency hiring indicators showed a temporary softening in white-collar recruitment. The Naukri JobSpeak Index declined by 9 percent (YoY) in October 2025, largely due to seasonal factors associated with the festive period. However, non-IT sectors continued to display resilience, with accounting and finance, education, and BPO/ITES recording positive hiring momentum. Demand for specialised skills remained strong, with AI and machine-learning roles registering a 33 percent YoY increase, underscoring the ongoing digital transformation of the economy. Looking ahead, hiring sentiment remains positive. The India Decoding Jobs Report 2026 projects hiring intent to rise to 11 percent in 2026, up from 9.75 percent in 2025, driven by sectoral expansion and sustained industry confidence. The report also highlights a 55 percent YoY increase in AI talent demand, with 72 percent of planned roles expected to be permanent. Complementing this, the India Skills Report indicates a significant improvement in employability, which has risen to 56.4 percent in 2026, with women surpassing men, reflecting the impact of digital upskilling and flexible work models.

Overall, easing inflation, resilient labour market fundamentals, improving employability, and sustained hiring intent reinforce confidence in the economy’s medium-term growth outlook. Supported by steady corporate performance, strong domestic demand, and continued policy momentum, the economy remains well-positioned to navigate global uncertainties while sustaining growth through the remainder of FY26.