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October 29, 2025 Indian Economy Shows Resilience Amidst Global Headwinds; NITI Aayog Highlights Regionally Balanced Services Growth

India's economy demonstrates continued resilience in late October 2025, driven by robust domestic demand and a services sector exhibiting increasingly balanced regional growth, as highlighted by a NITI Aayog report. Despite a slight slowdown in industrial production in September, key sectors like manufacturing and infrastructure materials saw positive growth. The Finance Ministry's review underscored stable inflation and strong forex reserves. Trade discussions are underway to address challenges from US tariffs and advance the India-EU Free Trade Agreement. The Reserve Bank of India has also accelerated its gold repatriation efforts.

Indian Economy Shows Resilience Amidst Global Headwinds; NITI Aayog Highlights Regionally Balanced Services Growth

The Indian economy has displayed significant resilience in the last 24 hours of news, with key reports indicating strong fundamentals despite global challenges. A notable development is the NITI Aayog's report, which states that India's services-led economic growth is becoming more regionally balanced. This suggests that states with lower initial shares in services are catching up with more advanced ones, leading to a broader and spatially inclusive transformation. The services sector is a cornerstone of India's economic growth, contributing nearly 55% of the national Gross Value Added (GVA) in 2024-25. The report recommends prioritizing digital infrastructure, logistics, innovation, finance, and skilling to enhance sectoral competitiveness and diversification, while acknowledging challenges in uneven employment generation and job quality.

Industrial Production and Economic Strength

India's industrial output experienced a slight slowdown, growing by 4% in September 2025, down from 4.1% in August. This growth was primarily driven by the manufacturing sector, which expanded by 4.8%. Within manufacturing, steel production surged by 14.1% and cement output climbed by 5.3%, reflecting ongoing infrastructure momentum. However, the energy sector showed weakness, with refinery output declining 3.7%, natural gas production falling 3.8%, and crude oil dropping 1.3%. For the first half of FY26 (April–September), overall industrial production grew 3%.

Concurrently, the Finance Ministry's review for September 2025 highlighted the economy's continued stability, bolstered by strong domestic demand, low inflation, and robust foreign exchange reserves. The International Monetary Fund (IMF) has raised India's GDP growth forecast for FY26 to 6.6%, with the Reserve Bank of India (RBI) projecting 6.8%. The labor market saw improvements, with the participation rate at 55.3% and unemployment easing to 5.2%. India's banking system remains well-capitalized, and the RBI's new Expected Credit Loss (ECL) framework along with ongoing GST reforms are anticipated to support credit expansion. India's exports increased by 4.4% in H1 FY26, reaching $413.3 billion, with services exports up 6.1% and electronics shipments surging 42%. Forex reserves remained steady at $697.8 billion.

Trade and Global Engagements

Commerce and Industry Minister Piyush Goyal is scheduled to meet exporters to discuss strategies for increasing shipments from India, particularly in light of challenges posed by a 50% additional tariff imposed by the US on Indian exports, which led to a 12% decline in exports to the US in September. Meanwhile, significant progress has been made in India-European Union Free Trade Agreement (FTA) negotiations, with both sides substantially reducing outstanding issues. A high-level EU trade delegation is expected to visit New Delhi next week to conclude technical tariff negotiations.

RBI's Gold Repatriation

The Reserve Bank of India (RBI) has accelerated its efforts to repatriate gold, bringing home nearly 64 tonnes between March and September 2025. This move reflects increasing global skepticism about keeping sovereign assets offshore amid geopolitical uncertainties. As of the end of September, 575.8 tonnes of India's total 880.8 tonnes of gold reserves are held domestically.

Stock Market Overview

The Indian equity benchmark indices closed lower on Tuesday, October 28, with the BSE Sensex declining by 0.18% and the NSE Nifty50 falling by 0.11%, primarily due to profit booking and cautious investor sentiment. Looking ahead to October 29, the market is expected to open cautiously, influenced by mixed global cues and anticipation of the US Federal Reserve's interest rate decision. Several companies announced their Q2 FY26 results, including Shree Cement, which reported a profit surge of over 300%, and Happiest Minds Technologies, showing consistent growth in revenue and profit. PNB Housing Finance also saw a 24% rise in net profit, while Bata India experienced a 73% decline.

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