Despite global economic challenges, India’s economy gained further momentum in October, supported by the rationalisation of goods and services tax (GST) rates and strong festival spending, according to the Reserve Bank of India’s (RBI) latest State of the Economy report.
“GST collections improved over the previous month, signalling a solid rise in consumer demand,” said the report authored by RBI staff under the guidance of Deputy Governor Poonam Gupta.
High-frequency indicators for October also pointed to a broader pickup in manufacturing and continued strong growth across the services sector, the report noted. It added that the views in the article reflect those of the authors and not the RBI as an institution.
“The month of October has seen a further pickup in demand conditions, underscoring a resilient growth outlook,” the report stated.
The authors said India’s strengthened macroeconomic environment has boosted the capacity of financial institutions to support growth, while enabling the RBI to better calibrate regulatory measures to improve financial intermediation and credit flow.
“The fiscal, monetary, and regulatory steps taken so far this year should help create a virtuous cycle of higher private investment, productivity, and growth, leading to long-term economic resilience,” the report added.
The monetary policy committee has already frontloaded action by cutting the policy repo rate by 100 basis points, while the government has reduced GST rates. The RBI has also implemented reforms aimed at improving ease of doing business in the financial sector.
However, the merchandise trade deficit widened to a record high in October 2025. Exports fell after three months of growth due to global headwinds, while imports surged, driven largely by increased demand for gold and silver during the festive season.
Even so, the report emphasised that India remains relatively insulated from external shocks, supported by strong services exports, healthy remittances and favourable oil prices. “Foreign exchange reserves remain adequate to cushion adverse external shocks,” it said.
The report attributed the fall in October’s Consumer Price Index inflation — the lowest on record — to easing food prices, GST rate cuts, and a favourable base effect.
Financial conditions stayed comfortable, with system liquidity in surplus during the latter half of October and into November. However, rising credit–deposit ratios pushed up rates on certificates of deposit.
“Interest rates on CDs edged up slightly due to the rising credit–deposit ratio,” the report said.
Bank credit growth accelerated in October, while deposit growth held steady. As a result, the gap between credit and deposit growth widened to 160 basis points, from 90 bps in the previous month.