India’s economic momentum improved during the second quarter of FY26, supported by resilient domestic demand and stable financial conditions.
According to the Reserve Bank of India’s December 2025 Bulletin, growth strengthened compared with recent quarters, while inflation remained below the central bank’s tolerance threshold.
The Bulletin also highlighted progress on fiscal consolidation and external sector stability.
The RBI noted that the economy expanded at its strongest pace in six quarters during Q2 FY26.
High-frequency indicators for November suggested that overall activity remained stable, with demand conditions continuing to hold firm despite earlier global uncertainties.
Headline consumer price inflation edged higher during the period but stayed below the lower tolerance level set by the central bank.
Financial conditions remained supportive, and credit flow to the commercial sector continued at a healthy pace, indicating stable lending activity.
India’s current account deficit narrowed in Q2 FY26 compared with the same period last year.
This improvement was supported by a lower merchandise trade deficit, along with strong performance in services exports and sustained remittance inflows from overseas.
A separate analysis in the Bulletin reviewed the fiscal position of the Centre and States in the first half of FY26. Central government receipts broadly aligned with Budget estimates, with lower tax collections partly offset by higher non-tax revenues.
Revenue expenditure remained contained, while capital spending continued to show steady growth.
State governments reported higher revenue receipts from both tax and non-tax sources, although grants from the Centre declined.
States maintained revenue expenditure while improving capital outlays, contributing to a gradual improvement in expenditure quality across levels of government.
The Bulletin introduced a Composite Leading Indicator for manufacturing gross value added, designed to identify turning points in the sector’s growth cycle. Developed using advanced machine learning methods, the indicator has shown the ability to lead manufacturing growth trends by one quarter.
Another study examined how traditional safe-haven assets respond to geopolitical risks. The analysis found crude oil prices to be more sensitive to such shocks, while gold showed relatively stable behaviour.
Silver and US Treasuries displayed moderate responses, with neural network models improving volatility forecasts.
The RBI’s December Bulletin presents a picture of stable economic progress, supported by firm demand, manageable inflation and improving fiscal and external indicators. While global risks remain, the data suggest that India entered the second half of FY26 with balanced macroeconomic conditions and measured policy support.
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Published on: Dec 23, 2025, 2:29 PM IST
Neha Dubey
Neha Dubey is a Content Analyst with 3 years of experience in financial journalism, having written for a leading newswire agency and multiple newspapers. At Angel One, she creates daily content on finance and the economy. Neha holds a degree in Economics and a Master’s in Journalism.
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