Macro Economic Overview

India’s headline CPI inflation inched up, albeit remained muted at 2.1% YoY in August 2025 driven by deflation in food prices. Core CPI (excluding food and fuel) moderated to some extent, while remained elevated at 4.2% in August’25 owing to higher gold and silver prices.

YoY% change in Consumer price inflation for BRICS

India's fiscal health appears to be on a path of consolidation and stability, with the government demonstrating a commitment to fiscal responsibility while continuing to prioritize economic growth. The key deficit indicators of the union government, viz., gross fiscal deficit (GFD), revenue deficit and primary deficit witnessed an improvement during April-June 2025 over the corresponding period of the previous year.

General Government Fiscal Balance as a Percentage of GDP

Note:
1) Data for India is for the respective fiscal years. For example: 2024 pertains to the fiscal year FY25 (April 2024 to March 2025) and so on. For all other countries, the data pertains to calendar year.
2) Definition of General Government fiscal balance as a % of GDP: IMF defines this as Net lending (+)/ borrowing (-) is calculated as revenue minus total expenditure. This is a core GFS balance that measures the extent to which general government is either putting financial resources at the disposal of other sectors in the economy and nonresidents (net lending), or utilizing the financial resources generated by other sectors and nonresidents (net borrowing). This balance may be viewed as an indicator of the financial impact of general government activity on the rest of the economy and nonresidents (GFSM 2001, paragraph 4.17). Note: Net lending (+)/borrowing (-) is also equal to net acquisition of financial assets minus net incurrence of liabilities.
3) General Government includes Centre, States and Local Governments.
4) Positive balance indicates surplus, negative balance indicates deficit.
5) Projections for Brazil, France, India, Japan and UAE start after year 2023 and for all other countries it starts after 2024.

Source: IMF World Economic Outlook – April 2025

Indian policy rates have been among the most stable in the BRICS nation. The past three quarters have seen a downward tilt in policy rates across BRICS nation apart from Brazil. Indian rates are down 100 bps in this calendar year. The RBI, which held its MPC meeting on October 01, 2025, decided to maintain status quo on policy rates.

Nominal policy repo rate

India’s PMI indices stayed in expansionary territory, indicating continued economic momentum. The manufacturing PMI eased to 57.7 (September) from 59.3 (August), showing a slower but strong pace of expansion. Services PMI came in at a near 15-year high of 62.9 in August.

Trends in India’s PMI Manufacturing, Services and Composite Index

Indian forex reserves are the fourth largest in the world at US$ 694 bn in August (dip from US$698 in July). INR has depreciated by 3% so far this calendar year till August 2025.

Monthly Trends in India’s forex reserves and 12M rolling average exchange rate