Economy

 

Indian Economy Current Affairs, important for Competitive Exams.

GST Council Approves Major Rate Rationalisation; Insurance & Life-saving Drugs Made GST-Free

The 56th GST Council Meeting, chaired by Finance Minister Nirmala Sitharaman in New Delhi on 3 September 2025, approved sweeping rate rationalisation reforms to benefit the common man, farmers, labour-intensive industries, and the health sector.

🔑 Key Decisions:

  • Tax Slabs Reduced → Four GST slabs merged into two by scrapping 12% & 28%, retaining 5% & 18%.
  • Insurance → All individual life & health insurance policies exempted from GST, including family floaters & senior citizen policies.
  • Medicines →
    • 33 life-saving drugs: GST reduced from 12% → NIL.
    • 3 cancer & rare disease drugs: GST reduced from 5% → NIL.
    • Other medicines: 12% → 5%.
    • Medical devices & apparatus: 18% → 5%.
  • Daily-use items → Hair oil, soap, shampoos, toothpaste, bicycles, kitchenware, etc. → 5% GST only.
  • Food items → Namkeen, noodles, chocolates, sauces, pasta, ghee, butter, coffee, etc. → 12%/18% → 5%.
    • Milk (UHT), paneer, chena, Indian breads → 0% GST.
  • Consumer durables → ACs, TVs, dishwashers, small cars & motorcycles → 28% → 18%.
  • Agriculture → All farm equipment → 12% → 5%.

Financial Impact: Revenue loss of ₹48,000 crore, but deemed fiscally sustainable.

Meeting Participation: Attended by Union Ministers, State CMs, Deputy CMs, Governors & Finance Ministers from across India.

56th GST Council Meeting in New Delhi on 3 September 2025

The 56th GST Council Meeting began in New Delhi on 3 September 2025, chaired by Union Finance Minister Nirmala Sitharaman. The two-day meeting focuses on next-generation GST reforms, including rate rationalisation and compliance simplification.

Prime Minister Narendra Modi, in his Independence Day speech, emphasized the benefits of GST and announced that the new reforms would be unveiled on Diwali 2025, reducing taxes on essential goods and providing relief to farmers, the middle class, MSMEs, local vendors, and consumers.

India’s Economy Grows 7.8% in Q1 2025-26, Beating RBI Projections

GDP Growth: India’s economy grew 7.8% in April–June 2025, up from 6.5% in Q1 2024-25.

Key Drivers:

  • Agriculture: 3.7% (vs. 1.5% last year).
  • Manufacturing: 7.7%.
  • Construction: 7.6%.
  • Services: 9.3% (vs. 6.8% last year).

RBI Outlook:

Growth exceeded RBI’s projection of 6.5% for Q1. Full-year 2025-26 forecast remains 6.5%.

US Imposes 50% Tariffs on Indian Goods from Aug 27, 2025

The U.S. Customs and Border Protection (CBP) has issued a draft notice implementing 50% tariffs on Indian imports, effective 27 August 2025, in line with President Donald Trump’s Executive Order 14329.

The move follows Trump’s earlier announcement of an additional 25% tariff, citing India’s high trade barriers and close energy and defense ties with Russia.

PM Modi Inaugurates Maruti-Suzuki’s First EV “e VITARA” & Lithium-Ion Battery Plant in Gujarat

PM Modi inaugurated Maruti-Suzuki’s first Battery Electric Vehicle (BEV) e VITARA and the TDSG lithium-ion battery facility at Hansalpur, Ahmedabad on 26 August 2025.

Key Points:

  • EVs made in India to be exported to 100+ countries.
  • 80% of batteries to be produced domestically → reducing import dependence.
  • Project reflects Make in India & Atmanirbhar Bharat goals.

Women’s Employment Rate in India Nearly Doubles Since 2017-18

According to Ministry of Labour and Employment, Periodic Labour Force Survey (PLFS) 2023-24, Women workforce participation rate (WPR) nearly doubling from 22% (2017-18) to 40.3% (2023-24), and unemployment falling from 5.6% to 3.2%.

  • Rural female employment grew by 96%, while urban female employment rose 43%.
  • Women’s employability: 47.53% (2024) vs 42% (2013).
  • Postgraduates & higher: employment rate rose from 34.5% to 40% (2017-18 to 2023-24).
  • India Skills Report 2025: 55% graduates globally employable (vs 51.2% last year).
  • EPFO payroll: 1.56 crore women joined formal workforce in 7 years.
  • e-Shram portal: 16.69 crore women workers registered.
  • Female self-employment share: 51.9% → 67.4% (2017-18 to 2023-24).
  • Gender budgeting: ₹0.85 lakh cr (2013-14) → ₹4.49 lakh cr (2025-26).
  • PM Mudra Yojana: 68% loans to women (35.38 cr loans worth ₹14.72 lakh cr).
  • PM SVANidhi: 44% women beneficiaries.
  • Women-led MSMEs doubled to 1.92 cr, creating 89 lakh new jobs (FY21–FY23).

S&P Upgrades India’s Sovereign Credit Rating to ‘BBB’

On 14 August 2025, S&P Global Ratings upgraded India’s long-term sovereign credit rating to ‘BBB’ from ‘BBB-’, the first upgrade in 18 years, citing strong economic growth, better monetary policy credibility, and sustained fiscal consolidation.

  • India’s last upgrade by S&P was in 2007.
  • India’s real GDP growth averaged 8.8% (FY 2022–24), the highest in Asia-Pacific, and is projected at 6.8% annually over the next three years.
  • India’s debt-to-GDP ratio expected to decline from 83% (FY 2025) to 78% (FY 2029).
  • Other agencies’ ratings: Fitch: BBB- (since 2006), Moody’s: Baa3 (since 2020).
  • The upgrade came despite U.S. tariffs on Indian exports (50%), citing oil imports from Russia.

India Achieves 100 GW Solar PV Module Manufacturing Capacity

India has reached 100 Gigawatt (GW) of solar PV module manufacturing capacity under the Approved List of Models and Manufacturers (ALMM), up from 2.3 GW in 2014.

Prime Minister Narendra Modi hailed it as a step towards self-reliance and clean energy adoption. Union Minister Pralhad Joshi credited the success to initiatives like the Production Linked Incentive (PLI) Scheme and the 2019 ALMM Order.

Capacity surged from 8.2 GW in 2019 to 100 GW in 2025, with 100 manufacturers operating 123 units (up from 21 in 2021). This achievement supports the 500 GW non-fossil fuel target by 2030 and boosts India’s role in global decarbonization efforts.

India Bans Jute Imports from Bangladesh via Land Routes, Allows Only Through Nhava Sheva Port

On 12 Aug 2025, India banned imports of certain jute products from Bangladesh via land routes, restricting them to Nhava Sheva Seaport in Maharashtra. The ban covers bleached/unbleached woven jute fabrics, jute twine/ropes, and jute sacks/bags.

This follows earlier 2025 trade curbs and the April 9 revocation of Bangladesh’s transhipment facility (except for Nepal and Bhutan), amid diplomatic tensions after remarks by Bangladesh’s interim leader Muhammad Yunus in China.

The move aims to protect India’s jute industry, apply diplomatic pressure, and regulate import routes, impacting bilateral trade worth USD 12.9 billion in 2023–24.

RBI Keeps Repo Rate Unchanged at 5.5% – MPC Meet, August 2025

📅 RBI MPC Meeting – 4th, 5th, and 6th August 2025

The Monetary Policy Committee (MPC) of the Reserve Bank of India kept the repo rate unchanged at 5.5%, maintaining a neutral stance.

  • SDF rate: 5.25%
  • MSF & Bank Rate: 5.75%
  • Follows a 100 bps cut since February
  • Decision comes ahead of the festive season

📊 Projections:

  • FY26 GDP growth retained at 6.5%
  • FY26 inflation projected at 3.1% (down from 3.7% in June)
  • FY27 CPI expected to rise to 4.9%

India Becomes World’s 5th Largest Aviation Market in 2024

India handled 211 million air passengers in 2024, becoming the 5th largest aviation market globally, as per IATA’s World Air Transport Statistics (WATS) report.

This marks an 11.1% increase from 2023, overtaking Japan (205 million passengers).

The top aviation markets in 2024 were:

  1. USA – 876 million
  2. China – 741 million
  3. UK – 261 million
  4. Spain – 241 million
  5. India – 211 million

The Mumbai–Delhi route was ranked the 7th busiest airport pair in the world, with 5.9 million passengers. The busiest route globally was Jeju–Seoul (South Korea) with 13.2 million passengers.

MEA Defends India’s Oil Imports from Russia Amid Western Criticism

On 4 August 2025, the Ministry of External Affairs (MEA) defended India’s continued oil imports from Russia, calling U.S. and EU criticism unjustified and unreasonable.

India clarified that it began importing more oil from Russia only after traditional supplies were diverted to Europe due to the Ukraine conflict. The MEA emphasized that such imports are necessary for national interest and affordable energy for Indian consumers.

The MEA highlighted Western hypocrisy, noting that:

  • The U.S. still imports uranium, palladium, fertilizers, and other goods from Russia.
  • The EU had trade worth €67.5 billion in goods and €17.2 billion in services with Russia in 2024.
  • European LNG imports from Russia hit a record 16.5 million tonnes in 2024, surpassing previous years.

India asserted that its trade is a strategic compulsion, while others trade despite sanctions, undermining their own criticism.

U.S. Imposes 25% Tariff on Indian Imports from August 1, 2025

On 30 July 2025, U.S. President Donald Trump announced a 25% tariff on goods imported from India starting August 1, along with an unspecified penalty for India’s continued purchase of Russian oil and arms.

  • The move targets India more harshly than other countries, risking a major setback in U.S.-India trade talks.
  • Trump cited India’s high tariffs and non-monetary trade barriers, and its strong defense and energy ties with Russia.
  • India responded that it is reviewing the impact and remains committed to a fair bilateral trade deal.
  • The tariff is expected to hurt Indian exports, especially in textiles, footwear, furniture, and pharmaceuticals.
  • The U.S. has a $45.7 billion trade deficit with India; Indian exports to the U.S. were $87 billion in 2024.
  • The announcement could strain relations, already tense due to Trump’s ties with Pakistan and stalled trade negotiations.

India–UK Free Trade Agreement (FTA) 2025

India and the UK signed a landmark Free Trade Agreement (FTA) on 24 July 2025 during Prime Minister Narendra Modi’s visit to the UK, alongside UK PM Keir Starmer. The deal aims to double bilateral trade to $120 billion by 2030, creating new opportunities for exports, employment, and investment.

🔹 Key Benefits for India:

  • Zero tariffs on 99% of Indian exports to the UK
  • Boost to textiles, gems, leather, IT, auto parts, chemicals
  • Easier mobility for Indian professionals
  • Social security exemption for up to 3 years
  • Major gains for MSMEs and labour-intensive sectors

🔹 Key Benefits for the UK:

  • Gradual tariff cuts on Scotch whisky (from 150% to 40% in 10 years)
  • Reduced duties on cars, cosmetics, aerospace & medical devices
  • Access to Indian government tenders worth ₹4 lakh crore
  • Equal access to India’s financial services sector

The agreement also covers innovation, intellectual property, services, and labour rights, without compromising on India’s drug, food, or NHS standards. It will take full effect after UK Parliament ratification.

India Achieves 20% Ethanol Blending in Petrol — 5 Years Ahead of Target

India has achieved 20% ethanol blending in petrol in 2025, five years ahead of its original 2030 target, announced Petroleum Minister Hardeep Singh Puri. Ethanol blending rose from 1.5% in 2014 to 20% in 2025, marking a significant clean energy milestone.

This shift has led to major economic and environmental benefits:

  • ₹1.36 lakh crore saved in foreign exchange by reducing crude oil imports
  • ₹1.96 lakh crore paid to distilleries, boosting the biofuel sector
  • ₹1.18 lakh crore disbursed to farmers, enhancing rural incomes
  • 698 lakh tonnes of CO₂ emissions reduced, aiding climate goals

Ethanol is mainly derived from sugarcane and molasses, reinforcing its role in supporting agriculture. The Union Cabinet has also approved a price hike for ethanol for the 2024–25 Ethanol Supply Year, benefiting farmers and distillers further.

India Among World’s Most Equal Societies: World Bank Report

The World Bank has placed India among the world’s most equal societies, based on its latest Gini Index data.

  • India ranks 4th globally in income equality with a Gini Index of 25.5, after Slovak Republic (24.1), Slovenia (24.3), and Belarus (24.4).
  • Gini Index measures how evenly income or consumption is distributed—lower values indicate more equality.
  • India falls in the “moderately low inequality” group (25–30) and is very close to joining the “low inequality” category.
  • India’s score is better than 167 countries, including China (35.7) and the USA (41.8).
  • In 2011, India’s Gini Index was 28.8, which improved to 25.5 by 2022, showing consistent progress toward a more equal society.

RBI reduced the repo rate by 50 basis points to 5.5%

The RBI’s Monetary Policy Committee (MPC) on June 6, 2025 has reduced the repo rate by 50 basis points to 5.5%.

Consequently:

  • Standing Deposit Facility (SDF) rate adjusted to 5.25%
  • Marginal Standing Facility (MSF) rate and Bank Rate revised to 5.75%

The rate cut is expected to lower external benchmark lending rates (EBLR), possibly leading banks to reduce lending rates.

RBI Governor Sanjay Malhotra stated that the move aligns with the CPI inflation target of 4% ±2%, while also promoting economic growth.

Inflation forecast for FY26 revised to 3.7% (earlier: 4%)

GDP growth forecast for 2025–26 is retained at 6.5%, despite concerns over geopolitical tensions and weather uncertainties.

The next MPC meeting is scheduled from August 4 to 6, 2025.

India’s Industrial Growth Slows to 2.7% in April 2025

India’s industrial production growth slowed to 2.7% in April 2025, down from 3% in March, according to the Ministry of Statistics and Programme Implementation.

Sector-wise Performance (April 2025):

  • Manufacturing: +3.4%
  • Electricity Generation: +1.1%
  • Mining: -0.2% (a reversal from +0.4% in March)

Use-Based Classification (YoY growth April 2025 vs April 2024):

  • Capital Goods: +20.3%
  • Intermediate Goods: +4.1%
  • Infrastructure/Construction Goods: +4%
  • Consumer Durables: +6.4%
  • Consumer Non-Durables: -1.7%
  • Primary Goods: -0.4%

Despite positive growth in key sectors like capital and consumer durables, contractions in mining, consumer non-durables, and primary goods weighed down overall industrial output.

Income Tax Return Filing Due Date Extended to 15th September 2025

On 27 May 2025, the Central Board of Direct Taxes (CBDT) announced an extension of the deadline for filing Income Tax Returns (ITRs) for the financial year. The new deadline is now 15th September 2025, extended from the earlier 31st July.

This decision was made to accommodate significant revisions in ITR forms, system upgrades, and issues related to TDS credit reflection. The CBDT stated that the extension aims to ensure a smoother and more accurate filing process and address stakeholder concerns effectively.

India Becomes World’s Fourth-Largest Economy, Set to Overtake Germany

India has become the world’s fourth-largest economy, surpassing Japan, according to NITI Aayog CEO B.V.R. Subrahmanyam on 24 May 2025. India’s GDP now stands at $4.3 trillion, as per IMF data, placing it behind only the US ($30.5 trillion), China ($19.2 trillion), and Germany. India is expected to overtake Germany within 2.5 to 3 years to become the third-largest economy.

The IMF projects India will remain the fastest-growing major economy, with a growth rate exceeding 6% annually over the next two years. India’s GDP has doubled from $2.1 trillion in 2015, and is projected to reach $5.5 trillion by 2028. Meanwhile, Germany is expected to see zero growth in 2025, making it vulnerable in the global economic race due to trade tensions.

RBI Approves Record ₹2.68 Lakh Crore Surplus Transfer to Central Government for FY 2024-25

On 23 May 2025, the Reserve Bank of India (RBI) approved a record surplus transfer of over ₹2.68 lakh crore to the Central Government for the financial year 2024-25. The decision was made during a board meeting chaired by RBI Governor Sanjay Malhotra in Mumbai.

The Board of Directors also reviewed both domestic and global economic conditions and approved the RBI’s Annual Report and Financial Statements.

The surplus was calculated under the revised Economic Capital Framework, which mandates maintaining the Contingent Risk Buffer (CRB) between 5.50% and 7.50% of the RBI’s balance sheet. For 2024-25, the CRB has been raised to 7.50%.

This is the highest-ever dividend transfer by the RBI, intended to support government finances amid continuing economic challenges.

Index of Eight Core Industries (ICI) grew by 0.5% in April 2025

The Index of Eight Core Industries (ICI) grew by 0.5% in April 2025 compared to April 2024. Positive growth was recorded in the production of Cement, Coal, Steel, Electricity, and Natural Gas.

The Eight Core Industries — Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement, and Electricity — account for 40.27% of the IIP (Index of Industrial Production).

  • Cumulative growth of ICI from April 2024 to March 2025 was 4.5%.
  • Final growth for January 2025 stood at 5.1%.

Industry-wise Performance in April 2025 (YoY):

  • Cement: ↑ 6.7%
  • Coal: ↑ 3.5%
  • Steel: ↑ 3.0%
  • Electricity: ↑ 1.0%
  • Natural Gas: ↑ 0.4%
  • Crude Oil: ↓ 2.8%
  • Fertilizers: ↓ 4.2%
  • Refinery Products: ↓ 4.5%

Additional Notes:

  • Data for Feb, Mar, and Apr 2025 are provisional.
  • Renewable energy is included in electricity generation since April 2014.
  • A new steel product, HRPO, is included since March 2019.
  • The next ICI release (for May 2025) will be on 20th June 2025.

Indian economy to grow at 6.3 % during current fiscal

According to the United Nations’ mid-year World Economic Situation and Prospects (WESP) report, India’s economy is projected to grow at 6.3% in the current financial year, making it the fastest-growing major economy globally—ahead of China (4.6%), the US (1.6%), and the European Union (1%).

This growth is driven by robust household spending, strong government investment, and booming services exports, despite global economic challenges. Although slightly down from the earlier 6.6% forecast in January, India’s performance remains strong in a slowing global economy.

In 2026, India’s GDP growth is expected to be 6.4%, still healthy but slightly below earlier estimates. On a broader scale, the global economy faces rising trade tensions and policy uncertainty, with Germany potentially experiencing negative growth (-0.1%).

The report also highlighted positive trends for India:

  • Inflation is expected to decline from 4.9% in 2024 to 4.3% in 2025, staying within the central bank’s target range.
  • Employment and economic stability are showing signs of improvement.

India continues to shine as a bright spot in an otherwise fragile global economic outlook.

India–UK Free Trade Agreement Finalized

On May 6, 2025, Prime Minister Narendra Modi and UK Prime Minister Keir Starmer announced the successful conclusion of the India–UK Free Trade Agreement (FTA) and the Double Contribution Convention. The leaders hailed these as historic milestones in the India–UK Comprehensive Strategic Partnership.

The FTA aims to boost trade, investment, innovation, and job creation, while also promoting sustainable growth between the two open-market economies. It covers trade in goods and services, and is expected to enhance bilateral trade, create employment, and improve living standards in both countries.

India’s Exports Hit Record $824.9 Billion in FY 2024–25, Led by Strong Services Growth

India’s total exports reached a record $824.9 billion in the financial year 2024–25, according to the Reserve Bank of India. This represents a 6.01% increase over the previous year’s figure of $778.1 billion.

The growth was primarily driven by services exports, which rose 13.6% to $387.5 billion, also an all-time high. In March 2025, services exports alone grew 18.6% year-on-year, reaching $35.6 billion.

Merchandise exports for the year stood at $437.4 billion, with non-petroleum exports rising to $374.08 billion, marking a 6% increase from the previous year. These numbers exceed the Commerce Ministry’s earlier estimate of $820.93 billion, boosted by better-than-expected performance in the services sector.

India Lifts Over 17 Crore People Out of Extreme Poverty: World Bank Report 2025

India has successfully lifted over 17.1 crore people out of extreme poverty in the last ten years, according to the World Bank’s Spring 2025 Poverty and Equity report. Five states — Uttar Pradesh, Maharashtra, Bihar, West Bengal, and Madhya Pradesh — accounted for two-thirds of the poverty reduction.

In rural areas, extreme poverty dropped from 18.4% in 2011-12 to 2.8% in 2022-23, while in urban areas, it fell from 10.7% to 1.1% during the same period. The report also highlighted positive employment growth since 2021-22 and a rise in self-employment, especially among rural workers and women, boosting economic participation.

India Imposes 12% Safeguard Duty on Steel Imports

The Indian government has imposed a 12% safeguard duty on imports of certain non-alloy and alloy steel flat products to protect the domestic steel industry from rising import pressure.

Union Steel Minister H. D. Kumaraswamy welcomed the move, calling it a timely and necessary step to support domestic manufacturers, especially small and medium enterprises. The duty aims to ensure fair competition, restore market stability, and boost confidence in the Indian steel sector. The government reaffirmed its commitment to making the industry resilient, self-reliant, and globally competitive.

India’s Industrial Growth Slows to 2.9% in February 2025: Mixed Sector Performance Noted

India’s Index of Industrial Production (IIP) rose 2.9% year-on-year in February 2025, showing moderate growth compared to 5.0% in January, as per the Ministry of Statistics and Programme Implementation.

Sector-wise:

  • Manufacturing (highest weight in IIP) grew 2.9%
  • Electricity generation rose 3.6%
  • Mining increased by 1.6%

Overall IIP stood at 151.3 in February, up from 147.1 last year.

Within manufacturing, 14 of 23 industry groups posted gains, led by:

  • Basic metals: 5.8%
  • Motor vehicles, trailers, and semi-trailers: 8.9%
  • Other non-metallic mineral products: 8%

Key drivers: auto components, alloy steel, cement, and prefabricated concrete blocks.

Use-based trends:

  • Capital goods: +8.2%
  • Infrastructure/construction goods: +6.6%
  • Primary goods: +2.8%
  • Consumer durables: +3.8%
  • Consumer non-durables: -2.1%

The report included revised figures for January 2025 (first revision) and November 2024 (final), with 94% and 95% response rates respectively.

March 2025 IIP data will be released on April 28.

RBI Cuts Repo Rate to 6% in April 2025 Monetary Policy Review

On April 9, 2025, the Reserve Bank of India’s Monetary Policy Committee (MPC) unanimously cut the policy repo rate by 25 basis points to 6%, marking the second consecutive rate reduction this year. The Standing Deposit Facility (SDF) was adjusted to 5.75%, while the Marginal Standing Facility (MSF) and Bank Rate were set at 6.25%.

The MPC also shifted its policy stance from neutral to accommodative, citing evolving economic conditions and the need for close monitoring. RBI Governor Sanjay Malhotra mentioned that unless shocks arise, the committee will consider either maintaining rates or further cuts in future.

Inflation data showed food inflation dropped to a 21-month low of 3.8% in February 2025, while core inflation rose to 4.1%, driven by higher gold prices. The RBI projects CPI inflation at 4% for 2025–26, noting positive signs like falling crude oil prices, but also warning of risks from global uncertainties and weather-related disruptions.

The Governor also addressed global trade tensions, including tariff uncertainties, which he said could hurt both global and domestic growth, though exact impacts are hard to quantify. He added that all central banks are adopting a cautious approach due to weakening US dollar, lower bond yields, and falling oil prices.

The next MPC meeting is scheduled for June 4–6, 2025.

Govt Merges 26 Regional Rural Banks Under ‘One State, One RRB’ Plan

On 8 April 2025, the Department of Financial Services (DFS) under the Ministry of Finance announced the amalgamation of 26 Regional Rural Banks (RRBs) as part of the fourth phase of consolidation, following the principle of “One State, One RRB.” This move aims to improve operational efficiency, rationalize costs, and enhance rural financial inclusion.

The merger, based on stakeholder consultations since November 2024, covers RRBs in 10 states and one union territory. With this move, the number of RRBs is now reduced from 43 to 28, operating over 22,000 branches across 700 districts, with 92% branches in rural and semi-urban areas.

The government has been implementing RRB mergers in phases:

  • Phase 1 (2006–2010): RRBs reduced from 196 to 82
  • Phase 2 (2013–2015): Reduced to 56
  • Phase 3 (2019–2021): Reduced to 43
  • Phase 4 (2025): Now 28 RRBs remain

The reform is expected to boost the scale and efficiency of RRB operations and support India’s broader financial inclusion goals.

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