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India Economic Pulse
India Economic Pulse - economic indicators and policy measures decodes high frequency economic indicators and the direction of government thinking, to make them more relevant for businesses.
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We are pleased to present the December 2025 edition of EY India Economic Pulse by our Tax and Economic Policy Group. This edition highlights India’s robust economic trajectory and resilience in the face of global headwinds.
Key highlights:
- Robust GDP growth: India’s real GDP grew 8.2% in Q1FY26 driven by consumption, government capex and higher growth in manufacturing sector.
- Inflation at an all-time low: CPI inflation fell to 0.3% in October 2025, the lowest since January 2012, driven by a decline in food prices and GST rate cuts.
- Public Finances show moderation: Direct tax collections have shown moderate growth in FY26 (Apr-Nov) on account of subdued growth in personal income tax collections, which may be attributable to income tax rate rationalisation.
- An uptick in demand: Urban demand, supported by GST 2.0, gains momentum, as evident from strong growth in passenger vehicle registrations and personal loans.; rural demand continues to be robust.
- Impact of US tariffs: US tariffs have had a marginal impact on India’s exports as the non-oil merchandise exports registered a degrowth of 3.9% during FY26 (Sep-Oct), compared to a growth of 7.3% during FY26 (Apr-Aug). Service exports continue to provide resilience to India’s external sector.
- Mixed investment signals: Gross FDI inflow grew 16.1% y-o-y growth in FY26 (Apr–May), while PE/VC funding and capital raised remained flat.
- Recent landmark reforms such as GST 2.0 and the implementation of unified labour codes consolidating 29 laws into 4, underscore the Government of India’s unwavering commitment to deregulation and advancing ease of doing business.
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