All eyes are now on the Budget, set to be presented on February 1. A quick look at the state of the economy as the Finance Minister prepares to walk the economic tightrope. While the GDP growth hit a six-quarter high of 8.2% in Q2 FY26, inflation plunged to its lowest level in October at 0.25%. The RBI has described this phase of the Indian economy as a ‘rare Goldilocks phase’.
In the first advance estimates released by the government, GDP is expected to grow by 7.4% in FY26, after the Indian economy grew 8% in H1FY26.
Focus will be on how the finance ministry utilises this growth–consumption dynamic to support the common man, boost key sectors such as railways and defence, and increase employment at a time when India is facing global headwinds.
Low inflation, GST cut supports consumption
Low inflation, GST rationalisation and changes in income-tax slabs in 2025 have boosted domestic consumption amid global uncertainties, including steep 50% tariffs on Indian exports to the US and Mexico, roadblocks in reaching a trade deal with the US, and potential crude oil price shocks.
Headline CPI inflation in October fell to 0.25%, the lowest year-on-year CPI inflation in the current series, marking a sharp easing from 3.61% recorded in the Budget month of February 2025. In November, CPI inflation rose by 46 basis points to 0.71%. ”Impact of reduction in GST visible across all sectors,” noted the MoSPI report.
Consumer Food Price Index (CFPI) deflation stood at 5.02% YoY in October, the lowest in the current series.
Real GDP growth accelerates to six-quarter high
On the growth front real GDP hit a six-quarter high of 8.2% in Q2 FY26, supported by strong domestic demand. Here is a look at how GDP recorded in the last budget to this budget.
The Reserve Bank of India in its latest Monetary Policy Meeting (MPC) held in December has also raised its FY26 GDP growth projection at 7.3% from 6.5% it was projecting in the April 2025 meeting, just a month after the Budget.
Global risks loom
With global uncertainties and trade tariffs persisting in CY2026, investors and common men are awaiting the upcoming Budget, in which the finance ministry must support demand without risking overheating or undermining fiscal stability.