Trade Deficit Narrows as Exports Rebound
India's merchandise exports witnessed a robust increase of 19.37% year-on-year in November 2025, reaching USD 38.13 billion, reversing the contraction observed in October. This surge was primarily driven by higher shipments of engineering and electronics goods. Concurrently, imports experienced a dip of 1.88% to USD 62.66 billion, largely due to reduced inbound shipments of gold, crude oil, coal, and coke. As a result, the country's merchandise trade deficit narrowed significantly to a five-month low of USD 24.53 billion, a notable improvement from the record USD 41.68 billion in October. Exports to the United States and China also saw considerable jumps, despite the imposition of a 50% tariff by the US on many Indian goods. The government is reportedly finalizing a Rs 25,060 crore export promotion mission to further mitigate the impact of these tariffs.
GDP Growth Forecasts Revised Upwards
Leading analytics company Crisil has raised its GDP growth forecast for the Indian economy to 7.0% for the fiscal year 2025-26, an increase of 50 basis points from its previous projection. This revision follows a strong 8.0% growth recorded in the first half of the fiscal year. The Reserve Bank of India (RBI) also upwardly revised its full-year GDP growth projection to 7.3%. Finance Minister Nirmala Sitharaman highlighted India's robust 8.2% GDP growth in the September quarter, asserting that the country is not a "dead economy" as some critics suggested. Domestic consumption, supported by benign inflation, GST rationalization, and income tax relief, is expected to be a key driver of this sustained growth.
Retail Inflation Eases, RBI Cuts Rates
Retail inflation in India for November 2025 was recorded at a low 0.7%, marking the second-lowest level in the current data series. This decline was significantly influenced by a 2.8% contraction in food prices. In response to the favorable inflation trend, the RBI's Monetary Policy Committee (MPC) cut interest rates by 25 basis points in December 2025, bringing the repo rate to 5.25%. This move contributes to a total of 125 basis points in rate cuts during 2025, the most significant since 2019. Crisil projects CPI-based inflation to further soften to 2.5% in fiscal 2026 from 4.6% in fiscal 2025.
Rupee Weakens Amid Foreign Outflows
The Indian rupee experienced a slump, reaching a new record low of 90.74 against the US dollar. This depreciation is attributed to uncertainty surrounding a potential India-US trade deal and continuous outflows of foreign funds. Foreign Institutional Investors (FIIs) have withdrawn approximately US$2 billion from Indian equities in December so far, impacting market sentiment.
PLI Scheme Boosts Manufacturing and Exports
The Production Linked Incentive (PLI) scheme continues to be a crucial policy instrument in strengthening India's manufacturing base and enhancing export competitiveness. The scheme, rolled out across various strategic sectors such as electronics, pharmaceuticals, automobiles, telecom, textiles, and specialty steel, has led to higher domestic production, increased capacity utilization, and attracted significant investments. It aligns with national priorities like Make in India and Atmanirbhar Bharat, reinforcing India's position as a global manufacturing hub.
Banking Sector Shows Improved Health
The Indian banking sector has demonstrated improved health, with Public Sector Banks (PSBs) reporting a substantial decline in their Gross Non-Performing Assets (GNPAs) from 9.11% in March 2021 to 2.58% in March 2025. Net NPAs also fell to a two-decade low of 0.52%. Domestic bank deposits and credit have nearly tripled over the last decade. Furthermore, the RBI has relaxed norms for opening and maintaining Cash Credit, Current, and Overdraft accounts, aiming to streamline banking operations.
Unemployment Rate Falls to Eight-Month Low
In a positive development for the labor market, India's unemployment rate decreased to an 8-month low of 4.7% in November.