country’s economy
The Finance Ministry has said in its September economic report that India’s growth outlook for the current financial year remains strong due to domestic demand, favorable monsoon, low inflation and the recent cut in GST rates. The report says that amidst this uncertain global outlook, India’s economy is continuously gaining momentum. Demand conditions across rural and urban India have strengthened with the implementation of GST reforms and the festive season, matching industry reports indicating strong growth in sales, especially in segments like automobiles.
RBI and IMF increased estimates
On the supply side, there was “healthy” growth in the manufacturing and service sectors. The government said India’s growth projections for FY2026 have been advanced, taking into account the higher-than-expected growth in Q1FY2026 and continued upward trends in Q2FY26. The IMF now estimates the real GDP growth rate to be 6.6 percent, while the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) expects real GDP growth to be 6.8 percent. This means that both have increased their previous estimates by 20 and 30 basis points.
Strong on inflation front
According to the report, inflation, especially due to reduction in food inflation, has remained under control to a great extent. Due to continued deflation in the food category, retail inflation has declined to 1.54 percent in September 2025, resulting in retail inflation falling to 1.7 percent in the second quarter of FY 2026. Prices of non-food and non-fuel products remained stable, and core inflation is estimated at 4.6 percent in September 2025. The ministry said that barring shocks caused by adverse weather events and supply chain disruptions, price stability is expected to remain. RBI has estimated inflation to be 1.8 percent in the third quarter of FY 26 and it is expected to increase in the fourth quarter of FY 2026 and the first quarter of FY 27 if the base effect reduces.
Banking system reform
According to the report, RBI’s efforts to maintain adequate liquidity in the banking system have played an important role in ensuring availability of resources to strengthen economic activities. Apart from this, the transmission system in both currency and loan markets is functioning smoothly, which shows the effectiveness of these measures. These measures are aimed at “strengthening the banking sector, improving loan flow, promoting ease of doing business, simplifying foreign exchange management and internationalization of the Indian rupee”.
Increase in exports also
On external trade, India’s external economic activity remains “resilient” with stable trade performance in H1FY26 amid a dynamic global trade outlook. The country’s total exports (goods and services) have registered a growth of 4.4 percent year-on-year in the first half of FY26, reaching US $ 413.3 billion. While product exports have increased by 3 percent (yearly), service exports have increased by 6.1 percent (yearly). During the same period, core commodity exports continued to grow strongly at 7.5 per cent (y-o-y). The government said it is focusing on making the Indian economy resilient to external vulnerabilities through structural reforms.