India
Why this matters
Section titled “Why this matters”India’s economy grew 7.6% in 2025, the fastest of the five big economies (see the chart). At $4.0 trillion (World Bank), it is still smaller than Japan’s, but it has been catching up quickly from a much lower income per person.
What drives it
Section titled “What drives it”India leans toward consumption. Households spend about 57% of GDP (World Bank), more than in China, Japan or the EU. Services such as software, finance and trade make up about half of the economy (World Bank).
The indicator to watch
Section titled “The indicator to watch”CPI inflation. India’s nominal anchor is 4% CPI inflation, with an acceptable range of 2% to 6% (RBI). CPI is the headline measure, food included. That matters in India, where households spend about 57% of GDP, so a jump in food prices hits many families directly.
India: consumer price inflation vs the RBI's 4% goal since 2016
Yearly figures. Hover for values. The RBI aims for 4%, and 2% to 6% counts as acceptable.
Data as of 2025 · Source: World BankHow the Reserve Bank of India operates
Section titled “How the Reserve Bank of India operates”The Reserve Bank of India (RBI). Since 2016 its job has been defined by an inflation target: 4%, with an acceptable range of 2% to 6% (PRS India). The RBI Act was amended in 2016 to give this “flexible inflation targeting” a legal basis (RBI).
| Decision body | The Monetary Policy Committee (MPC): six members. Three are from the RBI (the Governor as chair, the Deputy Governor for monetary policy and one more officer) and three are outside experts appointed by the government (RBI) |
| Meetings | At least four times a year (RBI) |
| Policy rate | The repo rate: the rate at which the RBI lends to banks against government securities (RBI) |
The numbers
Section titled “The numbers”India: growth, inflation and jobs since 1990
Yearly figures. Hover for values.
Data as of 2025 · Source: World Bank (unemployment is an ILO modelled estimate)Growth averaged about 6% a year from 2010 to 2025. The one big dip was 2020, when COVID shrank the economy by 5.8%, followed by a 9.7% rebound in 2021.
Real-world example: taming inflation with a target
Section titled “Real-world example: taming inflation with a target”From 2009 to 2013, Indian inflation ran at around 9% to 12% a year (see the chart). High inflation hurts poor households most, because more of their income goes on food and fuel.
In 2016, India changed the law to give the RBI a formal target: 4% inflation, within a 2% to 6% range. Average inflation fell from 6.8% in the four years before the framework to 4.9% after it (PRS India). A clear, public target helps people and businesses expect lower inflation, which itself helps keep inflation low.
Key takeaways
Section titled “Key takeaways”- India is the fastest-growing of the five, from a lower starting point.
- Household spending is a bigger part of its economy than in China, Japan or the EU.
- Since the RBI’s 4% target began in 2016, average inflation has fallen from 6.8% to 4.9%.