Overall economic activity has held up with demand conditions remaining robust: RBI Bulletin

High-frequency indicators of November suggest that overall economic activity has held up with demand conditions remaining robust said Reserve Bank of India (RBI) officials in the December edition of RBI Bulletin released on Monday (December 22, 2025).

“Headline CPI inflation edged up but continued to remain below the lower tolerance level. Financial conditions remained benign, and the flow of financial resources to the commercial sector remained robust,” they said.

Stating that in Q2:2025-26, real gross domestic product (GDP) registered a growth of 8.2%, the highest since Q4:2023-24, on the back of robust private consumption and fixed investment, they said the growth in private consumption was sustained by a robust rural demand and easing inflationary pressures. Net exports continued to be a drag on growth, they added.

“Notwithstanding a sharp uptick in real GDP growth in Q2, the nominal GDP registered a four-quarter low growth of 8.7%. The narrowing of the gap between nominal and real GDP growth reflected the moderation in the GDP deflator to a low of 0.5%,” they said.

They said while the low GST revenue collections were largely influenced by GST rate rationalisation, other available high-frequency indicators of increase economic activity such as e-way bills, petroleum pick-up consumption and digital payments, registered a pick-up in growth.

“The sharp increase in e-way bill transactions generation indicates a rise in goods movement and declinedfreight activity supported by the GST reforms,” they said.

Emphasising that the Indian economy was not fully immune to the external sector headwinds, they said coordinated fiscal, monetary and regulatory policies had helped to build resilience over the year. Bolstered by strong domestic demand, the economic growth has been robust.

“Benign inflation outlook provided adequate space for monetary policy to support growth. Continued focus on macroeconomic fundamentals and economic reforms should help unlock efficiencies and productivity gains to firmly keep the economy on the high-growth trajectory amidst a fast-changing global environment,” they said.

They said the year 2025 brought about an unprecedented shift in global trade policies, marked by a move towards bilateral renegotiations on tariffs and terms of trade. Its ripple effects on global trade flows and supply chains are still unfolding.

“This has led to heightened global uncertainties and concerns about the prospects for global growth. Equity markets, on the other hand, remained ebullient during much of the year on Big Tech optimism, though concerns about high valuations have, of late, given rise to some risk-off sentiments in the equity markets,” they said.

Portfolio flows to emerging markets are also witnessing a slowdown in recent months, they highlighted:

They said India’s current account deficit moderated in Q2:2025-26 over the same period last year, supported by a lower merchandise trade deficit, robust services exports, and strong remittance receipts.