India’s Economic Surge: Strong GDP Growth, Capex Focus in Budget 2025, and Multi-Year Low Inflation

India’s Economic Surge: Strong GDP Growth, Capex Focus in Budget 2025, and Multi-Year Low Inflation

India's economy is experiencing robust GDP growth, with a strong 8.2% year-on-year expansion in the September quarter of 2025, marking the sharpest growth since early 2024 and surpassing market expectations. The upcoming Union Budget is expected to prioritize capital expenditure (capex) as a key driver for sustaining this momentum, while inflation remains at multi-year lows, hovering around 0.71% in November 2025.

GDP Growth Highlights

• India's GDP grew by 8.2% in the third quarter of 2025, up from 7.8% in the previous quarter, driven by strong consumer spending and manufacturing activity.
• Full-year GDP growth for FY 2025-26 is projected at 7.5%, with economists forecasting a gradual slowdown to around 6.5% in the coming years. 
• This growth reflects resilience amid global trade uncertainties and domestic fiscal measures, including government spending and tax reforms. 

Fiscal Policy and Capex Focus

• The Union Budget 2025-26 is set to emphasize capex, with plans to increase capital expenditure by about 10% compared to the previous fiscal year.
• The government aims to maintain a fiscal deficit of around 4.4% of GDP while allocating ₹11.21 lakh crore for capex, focusing on infrastructure, green bonds, and digital transformation.
• Policy experts suggest that boosting capex will help sustain growth, especially as private consumption remains sub Focus. 

Inflation Trends

• India's inflation rate in November 2025 was 0.71%, up from a record low of 0.25% in October, but still below the Reserve Bank of India's (RBI) lower tolerance threshold of 2%
• .Food prices have declined, contributing to the low inflation, and the RBI has room for further rate cuts if growth momentum persists.
• Core inflation (excluding food and energy) remains moderate, supporting the case for accommodative monetary Trends. 

Budget 2025-26 Outlook

• The budget will balance fiscal prudence with growth support, focusing on capex, tax reforms, and measures to boost private consumption.
• Green bonds, climate fiscal instruments, and digital infrastructure are highlighted as priorities, along with initiatives to improve female labor force participation.
• The government's approach is to maintain growth momentum while ensuring fiscal consolidation and addressing long-term challenges like demographic transition. 

This comprehensive economic picture positions India as a leading growth story globally, with strong GDP performance, a capex-driven fiscal policy, and inflation at historic lows setting the stage for sustained development in the coming year.