Macro Moments Of The Year: GST Cut, Cooling Inflation, GDP At 8.2%, And More

As 2025 draws to a close, India’s economic landscape reflects a mix of resilience, reform, and recalibration. From tax overhauls to monetary easing, here are six defining developments that dominated headlines and policy debates this year.

A major overhaul of the goods and services tax (GST) system came into effect on Sept. 22. The new GST rate changes, cleared by the GST Council, altered the tax burden across a wide range of items used every day.

The Council decided to move away from the earlier four-slab structure of 5%, 12%, 18% and 28%, opting instead for a simpler two-rate system of 5% and 18%. A higher rate of 40% has been reserved for certain categories such as high-end vehicles, tobacco and sin goods.

The new GST rates and structure was brought in place to ease costs on several household essentials, while raising levies on luxury products.

India’s retail inflation dropped to a historic low of 0.25% in October 2025, marking the lowest level since the current Consumer Price Index series was introduced. This was driven by deflation in food prices.

In November, the inflation edged up marginally to 0.71%, but continued to remain well below the RBI's target of 4%.

India’s economy maintained strong momentum in the July–September quarter of FY 2025-26, with real GDP expanding by 8.2%, up from 5.6% in the same period last year, according to data from the National Statistics Office.

This surpassed the analysts' estimates, and cemented India's place as the "world's fastest growing economy". The sharp acceleration comes amid global headwinds, with Indian exports to the US subjected to tariffs as high as 50%. However, a boost in domestic consumption played a crucial role in the GDP surge.

The Union Budget 2025 introduced significant income tax cuts and revisions under the new tax regime. Resident individuals with total income of up to Rs 12 lakh have zero tax liability.

The income brackets within the new tax regime were expanded, and lower tax rates were introduced for some middle-income brackets.

The government had stated that these revisions would lead to the government foregoing approximately Rs 1 lakh crore in direct tax revenue.

The Indian rupee slid to a fresh all-time low for the fourth consecutive session on Dec. 16 , pressured by strong dollar demand and continued foreign portfolio outflows. The currency weakened past 91 per dollar, breaking its previous record low of 90.7875 it hit on Monday.

On Wednesday (Dec. 17), it rebounded 55 paise from record low to settle at 90.38 against the US dollar.

The rupee is among the worst-performing emerging market currencies this year, having declined 6% against the greenback. The slide has been intensified by the impact of steep US tariffs on Indian exports and persistently weak portfolio inflows.

The Reserve Bank of India’s Monetary Policy Committee cut the policy repo rate by 25 basis points to 5.25% on Dec. 5, marking its third reduction in FY26. The central bank so far delivered a cumulative rate cut of 125 basis points.

The fresh easing came against the backdrop of cooling inflation and firm domestic demand. RBI Governor Sanjay Malhotra said in a video address that inflation had come down faster than expected, and described the current environment of low prices and strong growth as “a rare goldilocks period.”