India Remains Fastest Growing Major Economy,  Says RBI

Mumbai, May 29, 2025:  The Reserve Bank of India (RBI), in its Annual Report for FY2024–25, affirmed India’s status as the world’s fastest-growing major economy, with GDP expanding by 6.5% despite global trade disruptions and policy uncertainty.

Macroeconomic Resilience Amid Global Uncertainty

India’s econom͏y r͏emained re͏sil͏ient, with͏ real gross value a͏d͏ded (GVA) increasing by 6.4%. T͏his was sup͏ported by a reboun͏d͏ i͏n agriculture͏ (4.6%͏), steady ͏growth ͏in͏ ser͏vices (7.5%), ͏and moderate indust͏rial expansion (4.3%). The RBI credited this ͏performance to sound f͏u͏ndamentals, ͏timely policy͏ respon͏ses͏, and fiscal discipline.͏

Inflation Cools, Policy Becomes Accommodative

Headline inflation eased to 4.6% from 5.4% in FY24. Core inflation dropped to 3.5%, and fuel prices declined by 2.5%, balancing high food inflation, which averaged 6.7% and peaked at 9.7% in October 2024. By March 2025, food inflation had reduced to 2.9%. Responding to these trends, the MPC shifted its policy stance from “neutral” to “accommodative,” cutting the repo rate by 50 basis points in two steps to 6.0%.

Strong Banking Sector, Robust Credit Growth

Scheduled commercial banks (SCBs) improved asset quality, with GNPA and NNPA ratios falling. Profitability metrics, such as Return on Assets (RoA) and Return on Equity (RoE), remained strong. Deposit rate hikes narrowed the credit-deposit gap. NBFCs continued double-digit credit growth despite a slowdown in unsecured loans. Urban Cooperative Banks (UCBs) demonstrated stronger financial performance with better capital positions.

Fiscal Consolidation Continues

The Centre trimmed its fiscal deficit to 4.7% of GDP from 5.5%, while states adhered to the 3.2% consolidated GFD limit. Capital expenditure increased by 5.2%, with revenue spending rising by 5.8%.

External Sector Remains Stable

India’s current account deficit stood at 1.3% of GDP (April–December 2024), supported by services exports and remittances. Exports remained flat, imports increased by 6.2%, and the trade deficit reached $282.8 billion. Forex reserves stood at $668.3 billion as of March 2025, covering 11 months of imports. Net FDI fell to $0.4 billion, but debt inflows and reserves kept the sector stable.

Digital and Green Push Gains Momentum

UPI contributed 48.5% of global real-time payment volume. Digital payment volumes increased by 34.8%, and transaction values rose by 17.9%. The CBDC-Retail pilot reached 60 lakh users via 17 banks. RBI introduced PRAVAAH and launched FinTech and EmTech repositories. Green initiatives included the issuance of sovereign green bonds, revised Production Sharing Ratio (PSL) norms, and support for key national missions.

Looking Ahead to FY2026

GDP ͏growth is projected at 6.5%, with CPI inflat͏ion e͏xpected at 4.0%, as͏suming favourable monsoons and sta͏ble fo͏od ͏p͏rices. Risks inc͏lude ͏tr͏ade ͏p͏rot͏ecti͏oni͏s͏m, mar͏ket volatility, and cl͏im͏ate sho͏cks. Th͏e ͏RBI reaffir͏m͏ed i͏t͏s focus͏ on fi͏nancial i͏nn͏ovation, poli͏cy stability, and sust͏ainab͏le grow͏th.͏

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REF: https://rbidocs.rbi.org.in/rdocs/AnnualReport/PDFs/0ANNUALREPORT202425DA4AE08189C848C8846718B080F2A0A9.PDF