Notwithstanding global headwinds, the Indian economy saw further momentum in October on the back of goods and services tax (GST) rate rationalisation and festival spending, as indicated by high-frequency indicators, the Reserve Bank of India’s (RBI’s) monthly State of the Economy report said.
“GST collections improved over the previous month, indicating a strong pickup in consumer demand,” the report, authored by RBI staff with guidance from Deputy Governor Poonam Gupta, said.
The report said high-frequency indicators for October suggest a broader uptick in manufacturing activity and continued robust expansion in the services sector.
It clarified that the views expressed in the article are those of the authors and do not represent the views of the RBI.
“The month of October has seen a further pickup in demand conditions, pointing towards a resilient growth outlook,” it said.
The report observed that improved macroeconomic frameworks and outcomes have strengthened the ability of financial institutions to support the economy and allowed the RBI to better calibrate regulatory measures to improve financial intermediation and credit flow.
“The fiscal, monetary, and regulatory measures undertaken so far this year should pave the way for a virtuous cycle of higher private investment, productivity, and growth, leading to long-term economic resilience,” it said.
While the monetary policy committee has frontloaded rate action by reducing the key policy rate by 100 basis points (bps), the government has reduced GST rates.
The RBI has also taken several regulatory measures to enhance ease of doing business for financial sector entities.
The report noted that the merchandise trade deficit widened to an all-time high in October 2025.
“While exports contracted after three months of expansion, reflecting the adverse impact of global headwinds, imports surged on account of higher gold and silver shipments catering to festival demand,” it said.
However, the report said that despite continuing uncertainty around global trade policies and concerns about their domestic impact, the Indian economy remains resilient to external shocks, supported by strong services exports, robust remittance receipts, and benign oil prices.
“Foreign exchange reserves remain adequate to cushion adverse external shocks,” it said.
Commenting on the all-time-low Consumer Price Index inflation in October, the report said the fall was driven by a decline in food prices, the GST rate cut on goods and services, and favourable base effects.
While observing that financial conditions remained benign, with system liquidity largely in surplus during the second half of October and in November, the report pointed to rising credit–deposit ratios of banks, which pushed up certificate of deposit rates.
“…interest rates on certificates of deposit edged up slightly on account of the rising credit–deposit ratio,” it said.
The report said credit growth of scheduled commercial banks picked up further in October, while deposit growth remained steady.
“With the pace of credit expansion outpacing deposit growth, the wedge between credit and deposit growth widened to 160 bps from 90 bps last month,” it added.
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