At year's end, robust growth, signs that economy weathered the storms, Pg8

Key Highlights:

• India's GDP growth reached 7.4% and 8.2% in the first and second quarters of fiscal year 2025, exceeding expectations.
• Retail inflation dropped to 0.3% in October 2025, the lowest since fiscal year 2012.
• The International Monetary Fund (IMF) revised global growth upwards by 40 bps to 3.2% for 2025, despite high US tariffs.
• The RBI's Monetary Policy Committee cut the repo rate by a cumulative 125 bps in calendar year 2025.
• Government capital expenditure (capex) was front-loaded, and Direct Benefit Transfers (DBT) to women supported consumption.

Detailed Insights:

• The Indian economy experienced a Goldilocks phase in 2025, characterized by robust growth and lower-than-expected inflation.
• The AI boom in the US benefited Asian and European economies by driving up exports of high-tech hardware and related services.
• Despite strong economic indicators, capital inflows into India were volatile, leading to rupee depreciation and subdued foreign investment.
• Unlike the taper tantrum of fiscal year 2013, India's macroeconomic parameters are currently healthy, with stress primarily on the capital account.
• Proactive fiscal policies, including front-loaded government capex and GST rate rationalization, played a key role in activating domestic growth.
• The production-linked incentive (PLI) scheme and emerging sectors are expected to account for a quarter of the country’s capex from fiscals 2026-2030.
• Reaching a trade agreement with the US is expected to reduce uncertainty and improve confidence, encouraging capital inflows into India.

Key Concepts Involved:

• GDP Growth: The rate at which a nation's economy grows from one year to another.
• Retail Inflation: The change in the price of goods and services that consumers buy.
• Fiscal Policy: Government spending policies that influence macroeconomic conditions.
• Monetary Policy: Actions undertaken by a central bank to manipulate the money supply and credit conditions to stimulate or restrain economic activity.