The high frequency indicators for December suggest continued buoyancy in growth impulses with demand conditions remaining upbeat, the Reserve Bank of India (RBI) said in its ‘State of the Economy’ article published on Wednesday.
Rural demand indicators regained momentum with retail automobile sales recording broad-based growth across categories. An increase in automobile sales was driven by enhanced affordability following GST rate cuts, year-end promotional offers, and increased demand ahead of expected price revisions in January, it said.
Retail commercial vehicles sales sustained strong growth due to improved goods movement and underlying economic activity, as per the article.
Growth indicators
The real GDP growth is estimated at 7.4% in 2025-26, up from 6.5% a year ago, according to the National Statistics Office’s first advance estimate.
In December, the consumer price index inflation rose to 1.3% driven by a lower rate of deflation in the food group along with an increase in core.
Meanwhile, electronic-way bill generation continued to record healthy growth, led by GST rate rationalisation, alongside stock clearance and firms’ efforts to meet year-end sales targets.
The Indian economy has demonstrated marked resilience and is expected to perform better going ahead despite global uncertainties, it said, adding that: “Even amid these global uncertainties, the current state of the economy provides ground for optimism going forward”.
Geopolitics; reforms in 2025
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The onset of 2026 was marked by the US intervention in Venezuela, simmering conflict in the Middle East, ambiguity surrounding the Russia-Ukraine peace deal, and escalation of the row over Greenland. The issues point towards a still-elevated geo-economic risk and policy uncertainty in the year ahead.
“2025 also witnessed major economic reforms, including the rationalisation of tax structures, implementation of labour codes for labour market reforms, and financial sector deregulation, all of which are expected to strengthen the growth prospects,” the article said. Going forward, the policy focus on striking a balance between innovation and stability, consumer protection, and a prudent approach to regulation and supervision should help improve productivity and support long-term economic growth, it said.
The article has been prepared by central bank officials. The views in the article are those of the authors and not of the institution, the RBI said.
Ground for optimism
The article states that the country has made significant efforts to diversify and push exports, and is currently engaged in trade negotiations with 14 countries or groups, representing nearly 50 nations, including the European Union, Gulf Cooperation Council countries, and the US.
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Going forward, the policy focus on striking a balance between innovation and stability, consumer protection, and a prudent approach to regulation and supervision should help improve productivity and support long-term economic growth, it said.
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