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December 05, 2025 India's Economic Landscape: Robust Growth, Rupee Depreciation, and Data Scrutiny Dominates Headlines

India's economy is experiencing a period of robust growth, with a notable 8.2% GDP expansion in Q2 FY26 and Fitch Ratings upgrading its FY26 GDP forecast to 7.4%. However, this positive economic narrative is juxtaposed with the Indian rupee's significant depreciation against the US dollar, breaching the 90-mark for the first time. Simultaneously, concerns are being raised by experts and reports regarding the transparency and accuracy of India's GDP calculation methodologies. Business confidence has also seen a moderation, leading to cautious investment sentiment, even as India actively seeks to rebalance its trade ties with Russia.

India's Economy Shows Strong Growth, But Rupee Weakens to Record Lows

India's economic performance continues to impress with a strong showing of 8.2% GDP growth in the second quarter of Fiscal Year 2026 (Q2 FY26), marking its fastest pace in six quarters. This robust growth has led Fitch Ratings to revise India's full-year GDP forecast for FY26 upwards to 7.4% from an earlier 6.9%. The agency attributes this revision primarily to increased consumer spending and improved sentiment following Goods and Services Tax (GST) reforms. Falling inflation, which reached a low of 0.3% in October, is also expected to provide the Reserve Bank of India (RBI) room for further policy rate cuts.

Despite the booming economy, the Indian rupee has faced significant pressure, weakening to record lows against the US dollar and breaching the Rs 90 mark for the first time. Several factors contribute to this depreciation, including rising global risks and an increased demand for dollars driven by India's growing import needs for energy, electronics, and machinery. Record-high prices of metals and bullion, along with steep US tariffs impacting India's export competitiveness, have further exacerbated the situation. Additionally, delays in a new India-US trade arrangement have negatively impacted market sentiment. While a gradually weaker rupee can benefit exporters, its rapid decline raises concerns.

Scrutiny Over GDP Data Transparency and Business Confidence Moderates

Amidst the positive headline growth figures, questions are being raised about the transparency and accuracy of India's GDP calculation methods. A report by Systematix Research emphasized the need for transparent methodologies, robust surveys, and simultaneous index updates to accurately reflect the true state of the economy. The report highlighted a significant mismatch between official GDP numbers and on-ground indicators such as high-frequency data, corporate earnings, and credit growth, suggesting a starker picture. Former Chief Economic Advisor Arvind Subramanian echoed these concerns, stating that India's growth might not be as robust as headlines suggest, pointing to flat private investment, declining Foreign Direct Investment (FDI), and weak consumption growth. The report also noted a widening of "discrepancies" that propelled headline growth above the underlying "core" GDP, which reportedly slowed to a nine-quarter low of 4.1%.

Adding to the cautious sentiment, a recent survey by Dun & Bradstreet indicated a moderation in financial and investment confidence among Indian businesses for Q4 2025. Global uncertainty is dampening investment appetite, with businesses expected to defer long-term investments, tighten working capital, and extend supplier terms. Small and Medium-sized Enterprises (SMEs) are particularly bracing for tighter liquidity and higher borrowing costs. However, ongoing structural reforms and significant commitments to AI infrastructure, including Google's announced $15 billion investment for an AI hub, offer a favorable medium-term economic outlook.

India Aims to Boost and Rebalance Trade with Russia

In international trade news, Commerce Minister Piyush Goyal underscored India's commitment to reducing trade barriers and boosting exports to Russia to address the widening trade deficit between the two nations. Bilateral trade has already reached USD 70 billion, surpassing previous targets, but India's share in Russia's total imports remains below 2%. Both countries have set an ambitious target of USD 100 billion in bilateral trade by 2030. Goyal identified key sectors for Indian exports to Russia, including consumer goods, food products, automobiles, electronics, textiles, and IT services. He also highlighted India's large working-age population as a potential resource to address Russia's talent shortfall.

Other Key Business and Economic Developments

  • Finance Minister Nirmala Sitharaman announced that the proposed Health and National Security Cess will not be applied to essential commodities, and its proceeds will be shared with states for specific health schemes.

  • Union Minister of State for Finance Pankaj Chaudhary emphasized the Directorate of Revenue Intelligence's (DRI) crucial role in combating smuggling and protecting national security by cutting off illicit funds.

  • The Adani Group plans a significant investment of $15 billion to expand Indian airports by 2030, aiming to upgrade infrastructure and increase capacity.

  • India is witnessing a boom in data center investments, but experts warn of potential resource constraints, particularly concerning power and water shortages in key regions.

  • NITI Aayog has unveiled a roadmap designed to position India as a leading quantum-powered economy, outlining strategies for accelerating research and development, talent development, commercialization, and strengthening secure quantum infrastructure.

  • Indian stock markets, Sensex and Nifty, snapped a four-day losing streak, closing in the green, largely driven by IT stocks, despite the rupee's record low against the US dollar.

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