Budget 2025-26 forecasts 6.4% GDP growth, rising exports, strong FDI, and forex reserves at $640.3B, reinforcing economic stability.
Budget 2025-26: India’s Trade and Forex Stability Get a Boost
Finance Minister Smt. Nirmala Sitharaman presented the Union Budget 2025-26 today, outlining India’s economic growth trajectory and fiscal discipline. The budget highlights a strong macroeconomic framework, controlled inflation, and robust external trade performance, reaffirming India’s position as a fast-growing global economy.
Economic Growth & Fiscal Management
- GDP Growth Projections: India’s real GDP is expected to grow at 6.4% in FY25, while nominal GDP is projected to expand by 9.7%. For FY26, the nominal GDP is estimated to rise further by 10.1%.
- Inflation Control: Government supply-side interventions have kept retail inflation within the 4±2% range in FY25 (April-December). The RBI projects inflation at 4.6% in Q1 and 4.0% in Q2 of FY26, ensuring price stability.
- Fiscal Deficit Target: The government has revised its fiscal deficit target to 4.8% of GDP in FY25, aiming to reduce it below 4.5% in FY26, keeping India on track for fiscal consolidation.
- Revenue Deficit Reduction: Expected to decline from 4.8% in FY25 to 4.4% in FY26, reflecting improved revenue collection and expenditure control.
- Capital Expenditure Focus: The government has allocated ₹11.21 lakh crore (3.1% of GDP) for capital expenditure in FY26, almost 3.3 times the outlay of FY20. This includes ₹1.5 lakh crore as interest-free long-term loans to states for infrastructure development.
- Debt-to-GDP Ratio: The central government’s debt-to-GDP ratio is projected to decline to 56.1% in FY26 from 57.1% in FY25, reflecting prudent fiscal management.
India’s Trade and External Sector Performance
- Export Growth: India’s merchandise exports grew by 1.6% YoY in April-December 2024, while services exports saw a robust 11.6% growth in the same period.
- Current Account Deficit (CAD): India’s CAD moderated to 1.2% of GDP in Q2 FY25, an improvement from 1.3% in Q2 FY24, showcasing a healthier balance of payments.
- FDI Revival: Foreign Direct Investment (FDI) inflows surged to $48.6 billion (April-October 2024), up from $42.1 billion in the same period of FY24, indicating growing global investor confidence in India.
- Forex Reserves Strengthen: India’s foreign exchange reserves were estimated at $640.3 billion by December 2024, covering 90% of the country’s external debt. The import cover, a key indicator of external stability, stands at 11 months as of November 2024.
Strategic Economic Priorities for FY26
The government remains committed to:
- Driving broad-based and inclusive economic growth.
- Strengthening the manufacturing sector and exports.
- Enhancing capital investment in infrastructure.
- Boosting research & development in critical technologies.
- Maintaining fiscal responsibility and economic transparency.
India’s economic strategy, as laid out in Budget 2025-26, focuses on strengthening trade, fostering investment, and maintaining macroeconomic stability, positioning the country as a key global economic player.
(SOURCE: PIB Delhi)
