India's Inflation Dip Fuels Economic Momentum, Adviser Says

India’s economic expansion is gaining momentum, underpinned by persistently low inflation levels, according to a senior adviser to Prime Minister Narendra Modi. The adviser highlighted that the nation’s consumer price index (CPI) inflation stood at 3.8% in December 2025, well within the Reserve Bank of India’s target band of 2% to 6% and the lowest level since early 2022. This stability has bolstered household purchasing power and eased pressure on monetary policy, enabling sustained economic activity. The adviser emphasized that inflation at this level has helped maintain strong consumer confidence, reflected in a 7.2% year-on-year increase in retail sales volumes during the fourth quarter of 2025. Business investment also improved, with factory output rising 5.9% in November 2025, driven by manufacturing and infrastructure sectors. These trends suggest that domestic demand remains robust despite global headwinds. The central bank’s monetary policy stance has remained accommodative, with the repo rate unchanged at 6.5% since September 2024. With inflation expectations anchored and growth forecast at 6.7% for FY2026, the government is focusing on structural reforms to further boost productivity and attract foreign direct investment. The adviser noted that favorable inflation dynamics are allowing fiscal policy to operate with greater flexibility. Market participants have responded positively, with the S&P BSE Sensex rising 3.4% in January 2026, while the Indian rupee strengthened to 82.3 per US dollar. Investors view the low-inflation environment as a key enabler of continued economic resilience and long-term growth potential.