India’s economy grew 8.2% year-on-year in the July to September quarter of 2025, data from the government revealed on Monday, beating market forecasts and cementing optimism about the country’s economic outlook for the fiscal year. The growth was aided by steady domestic demand, firm manufacturing activity, and continued government spending on infrastructure. Real GDP for the first half of the fiscal year increased 7.8%.
Inflation Drops to a Multi Year Low
The latest numbers were followed closely by financial markets because they arrived days before the Reserve Bank of India’s monetary policy meeting. Retail inflation fell sharply to 0.25 percent in October, the lowest level in over a decade according to Reuters. The data showed that this was largely because of a sharp drop in food prices, which were very volatile in the last year, and by stable fuel costs. Core inflation, or non-food, non-fuel inflation, remained subdued.
Economists quoted in Reuters reports said the combination of stronger-than-expected growth and unusually low inflation may raise prospects of the central bank considering an interest rate cut. The RBI has not changed the benchmark repo rate since early 2024, citing global uncertainty, uneven monsoon conditions, and concerns about supply-side price shocks. The sharp fall in inflation has drawn particular attention. Reuters said that vegetable prices were down significantly in October, dragging down the low headline number. At the same time, however, some analysts told the news agency it is unclear whether this rate can be sustained, as seasonal price patterns tend to push food inflation upward in the winter months. Fuel prices have been relatively stable, providing added relief to the inflation basket.
Stock markets turned optimistic following the GDP data. Equity indices opened higher on Monday morning, mirroring better investor sentiment after a growth number above expectations. According to traders, markets have now largely focused on the announcement of the RBI policy and guidance for the future by the central bank. Bond yields and the rupee are also expected to take cues from the policy decision later this week.
India’s growth performance stands out against a backdrop of slowing demand, high interest rates, and weaker trade flows in several major economies. Reuters noted that India has continued to benefit from strong domestic consumption and public investment, even as exports remain under pressure due to soft global conditions. Some economists highlighted areas of strength in manufacturing and construction, supported by capital expenditure from the centre and states.
Markets Respond to the Data
According to the government data cited in Reuters reports, the manufacturing sector recorded healthy expansion during the quarter. Services activity also remained firm, especially in transport, communication and financial services. Construction benefitted from ongoing infrastructure projects under the government’s capital spending programme.
Economists interviewed by Reuters said household demand appears resilient even though monsoon rainfall was uneven across regions earlier in the year. Though it remains a concern for agriculture, the broader domestic economy has continued to show momentum. Private consumption has remained a key driver of growth and is expected to stay stable in the coming quarters unless there are significant price shocks.
This strong GDP print comes ahead of the national budget cycle, and policymakers will use this number for evaluating the fiscal position for the next year. Reuters added that despite the positive headline numbers, officials are keeping an eye on the global risks, such as the geopolitical tensions, volatility in crude oil prices, and slower growth in major export destinations like Europe and China. India’s external trade has been showing mixed trends, and economists said the export-linked sectors may turn vulnerable if global demand slows down further.
RBI Policy Meeting in Focus
The monetary policy committee of the RBI meets later this week, and financial markets have increased bets on a possible policy shift. According to Reuters, economists remained divided, with some arguing the central bank may wait for more data to confirm whether the drop in inflation is transient, while others think strong growth and low inflation together provide room for early easing. The central bank has not given any direct indication about its stance so far.
Most of the macroeconomic indicators for India have remained stable over the greater part of the last year. Strong tax collections and government expenditure on infrastructure have underpinned fiscal conditions. While manufacturing and construction benefited from this policy environment, services continue to expand. Although food inflation remains unpredictable, the October reading has afforded temporary relief. Going into the second half of the fiscal year, India’s policymakers will try to balance the momentum of growth with price stability. In the coming months, the interaction of global risks with domestic economic conditions will also be closely watched. The decision by the RBI, together with trade and industrial production data due later this week, will set the market’s tone for the economy in the second half of the year.
Clear Cut Research Desk
New Delhi, UPDATED: Dec 02, 2025 04:55 IST
Written By: Janmojaya Barik
