Current Affairs - Economy

The World Bank has maintained its GDP growth projection for India at 6.3% for FY2025–26, despite downgrading forecasts for 70% of global economies due to trade tensions and weak investment. India remains the fastest-growing major economy, supported by strong domestic demand, a resilient services sector, and moderating inflation. The RBI's monetary policy easing and expected fiscal consolidation further bolster this outlook. While global growth is projected at just 2.3%—the slowest since 2008 (excluding recessions)—India's steady performance highlights its economic resilience amid worldwide challenges.

The World Bank's latest report highlights India's significant achievement in reducing extreme poverty from 27.1% in 2011-12 to just 5.3% in 2022-23, using an updated poverty line of $3 per day (adjusted for inflation and purchasing power parity). This decline reflects the success of economic growth, welfare schemes (like food subsidies), and targeted poverty alleviation programs. The report also notes that 171 million people were lifted out of poverty in this period, with rural-urban gaps narrowing substantially. Despite global economic challenges, India's progress sets a benchmark for poverty reduction efforts worldwide.

The repo rate was reduced by 50 basis points to 5.5%, representing the third cut since February 2025. This move by the central bank is designed to stimulate economic growth at a time when inflation is well within the targeted range, thereby allowing for monetary easing. A 50 basis point reduction can significantly lower borrowing costs across sectors—affecting home loans, vehicle finance, and business credit. This helps encourage credit demand and boosts consumption and investment, which are key drivers of economic recovery. Such rate cuts are also vital for monetary policy transmission and support the broader macroeconomic goal of sustaining growth.

Nomura has projected that India’s GDP growth will slow down to 6.2% in FY26, a slight decline from the 6.5% growth recorded in FY25 and the sharp 9.2% expansion in FY24. This forecast reflects concerns about weakening fundamental economic indicators such as sluggish automobile sales and slow bank credit growth, despite strong headline data like GST collections. The moderation signals a cautious outlook amid global uncertainties and an uneven domestic recovery, contrasting with the Reserve Bank of India’s steady 6.5% growth estimate for the same period.

Only 1.74% of ₹2,000 notes remain in circulation following the Reserve Bank of India’s withdrawal that began on May 19, 2023. This marks a significant reduction from the original value of ₹3.56 lakh crore to just ₹6,181 crore by May 31, 2025. The withdrawal process has been largely successful, with 98.26% of the currency returned. Citizens can still exchange or deposit these notes at 19 designated RBI Issue Offices or through India Post for credit into bank accounts. The move is part of a broader effort to phase out high-denomination currency and promote cleaner note practices in the economy.