India's economic landscape continues to exhibit resilience and growth, as recent data and projections paint a largely positive picture for the nation. In the second quarter of Fiscal Year 2026 (Q2 FY26), the Indian economy is estimated to have expanded by 7.3%. This growth was significantly bolstered by increased rural consumption and sustained government expenditure. While household consumption saw an uplift due to improved agricultural output, urban demand and private investment showed a more subdued trend. This Q2 performance represents a slight moderation from the 7.8% growth recorded in the preceding quarter.
IMF Outlook and Economic Milestones
The International Monetary Fund (IMF) has expressed confidence in India's economic outlook, forecasting a real GDP growth of 6.6% for FY2025/26, which is expected to moderate slightly to 6.2% in FY2026/27. The IMF highlighted India's robust growth despite external uncertainties and its ability to keep inflation under control. Chief Economic Advisor V Anantha Nageswaran announced that the Indian economy is on track to surpass the $4 trillion mark within the current fiscal year (FY26), building on the $3.9 trillion recorded at the end of March 2025.
However, the IMF has revised its projection for India reaching the $5 trillion economy milestone, now anticipating it by FY29, a year later than previous estimates. This adjustment is primarily attributed to slower-than-expected nominal growth and a more significant depreciation of the Indian Rupee than initially projected. The IMF also reclassified India's exchange rate regime to a "crawl-like arrangement," noting the Reserve Bank of India's (RBI) frequent interventions to manage currency volatility.
Inflation and Monetary Policy
A key positive development for the Indian economy is the well-contained inflation. Consumer inflation averaged around 2% in Q2 FY26, and headline inflation eased to a historic low of 0.25% in October 2025. This low inflationary environment, coupled with the RBI's dovish signals in October, is strengthening the case for a potential 25-basis point interest rate cut in December. The RBI has emphasized the need for a combination of fiscal and monetary measures to stimulate private investment and foster sustainable growth through long-term reforms.
Rupee Performance and Foreign Investment
The Indian Rupee has experienced depreciation, sliding approximately 7% against the US dollar between late November 2024 and now, moving from ā¹83.4 to ā¹89.2. This decline is influenced by external pressures, including a widening current-account deficit and the impact of high US trade tariffs. In a concerning trend, India recorded negative net Foreign Direct Investment (FDI) for the second consecutive month in September, with outflows exceeding inflows by $2.4 billion. Despite these challenges, India's foreign exchange reserves remain comfortable, standing close to $693 billion, offering a buffer for currency management.
Stock Market Highlights
The Indian stock market witnessed a strong rally on November 26, with benchmark indices Sensex and Nifty50 closing near record highs. The Sensex surged over 1,000 points, and the Nifty reclaimed the 26,200 level. This broad-based rally was fueled by positive global cues, growing optimism for interest rate cuts by both the US Federal Reserve and the RBI, fresh inflows from foreign funds, and robust domestic economic fundamentals. Corporate earnings for Q2 FY26 were stronger than anticipated, contributing to expert projections of the Nifty 50 potentially reaching 30,000 by the end of 2026.
Several companies also made headlines with significant business developments. Paytm Payments Services received authorization from the RBI to operate as a Payment Aggregator. Havells India obtained board approval to acquire a 26% stake in Kundan Solar (Pali) for solar power plant development. Additionally, various other firms like Speciality Restaurants, Dr. Reddy's Labs, Axis Bank, M&M, and Oberoi Realty announced new projects, appointments, or strategic investments.
Other Key Developments
In a push for global competitiveness, Chief Economic Advisor V Anantha Nageswaran urged India's Micro, Small, and Medium Enterprises (MSME) sector to focus on innovation and quality-driven manufacturing to penetrate global markets. Defence Minister Rajnath Singh called for international collaboration to enhance India's maritime capabilities, emphasizing the country's growing shipbuilding ecosystem.