India's Economic Growth Surpasses Expectations Amid Record-Low Inflation

2025-12-01 economy

New Delhi, Monday, 1 December 2025.
India’s GDP grew over 8% in Q3 2025, exceeding forecasts, while retail inflation hit a historic low of 0.25% in October, prompting debates on potential rate cuts by the Reserve Bank of India.

Robust Economic Growth

India’s economy demonstrated significant growth, with GDP expanding by 8.2% in the July-September quarter of 2025. This marks the fastest growth among major economies, exceeding both the previous quarter’s 7.8% and analyst expectations of 7.4% [1][3][6]. The expansion has been driven by a combination of strong domestic consumption, which accounts for 57% of GDP and increased by 7.9%, and robust performances in sectors such as manufacturing and construction [3].

Inflation and Monetary Policy

In stark contrast to the rapid GDP growth, India’s retail inflation rate fell to a historic low of 0.25% in October 2025 [1][3]. This deflationary trend has led to debates regarding the Reserve Bank of India’s (RBI) approach to interest rates. Economists are divided on whether the RBI should cut the policy repo rate by 25 basis points during its upcoming policy meeting on December 5, 2025, considering the benign inflation environment [1].

International Trade and Tariffs

Despite the domestic economic achievements, India’s export sector faces challenges due to a 50% tariff imposed by the United States on Indian goods, which has led to an 11.8% decline in exports as of October 2025 [6]. These tariffs, a consequence of India’s purchases of Russian oil, are expected to impact sectors like textiles and jewelry, potentially reducing India’s export revenue to $49.6 billion in the current fiscal year, down from $86.5 billion the previous year [6].

Future Outlook and Reforms

The Indian government, under Prime Minister Narendra Modi, continues to focus on pro-growth policies and structural reforms to sustain the economic momentum [6]. The IMF has, however, rated India’s national accounts with a ‘C’ grade, pointing to methodological weaknesses such as outdated base year data and insufficient granularity [3]. This critique underscores the importance of ongoing statistical overhauls to improve data accuracy and economic forecasting [3].

Sources

inflation India