Key Highlights
- India posted a 7.6% real GDP growth in FY 2025‑26, the fastest among major economies.
- Headline CPI fell to 2.1% while the RBI cut the policy repo rate by 100 bps to 5.25%.
- Renewable power capacity crossed 250 GW and EV sales reached 2.5 million units.
- Broad money expanded 13.0%, reserve money grew 10.8% and the credit‑deposit gap widened.
- Financial inclusion index rose to 67.0 and digital payments surpassed 200 billion UPI transactions.
Detailed Insights
The Reserve Bank of India’s 2025‑26 Annual Report documents a dual narrative of robust domestic growth and heightened external volatility. Global real GDP slowed to 3.4% in 2025 and a West‑Asian conflict prompted the IMF to trim its 2026 outlook to 3.1%. Despite this backdrop, India’s economy expanded 7.6% YoY, driven by private consumption (PFCE up 7.7%) and a 7.1% rise in gross fixed capital formation. Inflationary pressures eased sharply, with headline CPI at 2.1% after a pronounced food‑price deflation, but the RBI cautioned that 2026‑27 inflation could rebound to 4.6%.
On the supply side, agriculture grew only 2.4% owing to Kharif shocks, yet an abundant south‑west monsoon replenished reservoirs to a record 91.4% of capacity. Manufacturing GVA accelerated 11.5%, aided by a 75.6% capacity utilisation. Renewable energy capacity reached 283 GW (53.2% of the mix), surpassing the COP26 target, while electric‑vehicle registrations crossed 25 lakh under the PM‑E‑DRIVE scheme.
Monetary aggregates widened considerably; reserve money rose 10.8% after the CRR was cut to 3.0%, and broad money expanded 13.0% supported by time‑deposit growth. Credit supply outpaced deposit growth, widening the credit‑deposit gap and prompting banks to issue more certificates of deposit. The policy repo rate was trimmed by 100 bps in three installments, shifting the stance from neutral to accommodative in April 2025 before reverting to neutral in June.
Financial markets showed mixed performance. G‑sec yields softened early in the year but later breached 7.04% for the 10‑year benchmark. The BSE Sensex slipped 7.1% annually, with foreign portfolio investors net‑selling ₹2.7 lakh crore of equities while domestic institutions bought ₹8.5 lakh crore. The rupee depreciated 9.9% against the dollar, and foreign exchange reserves stood at US$ 691.1 billion, providing over 11 months of import cover.
Fiscal consolidation continued as the central government’s gross fiscal deficit fell to 4.4% of GDP, aided by higher non‑tax revenues and restrained spending. The Sixteenth Finance Commission preserved a 41% vertical devolution to states and re‑weighted horizontal criteria, eliminating post‑devolution deficit grants.
On the inclusion front, the RBI’s Financial Inclusion Index climbed to 67.0, driven by expanded digital‑payment coverage in 710 districts and the creation of over 7.3 crore basic savings accounts, of which women hold 52%. The “Panch‑Jyoti” roadmap, launched in December 2025, outlines a 47‑point plan across five pillars to deepen inclusive finance.