India's Growth Path: How Strong Demand and Govt Capex Fuel FY26 Economy

India’s overall macroeconomic environment remains stable, supported by easing inflation, resilient domestic demand, and continued policy momentum. The favourable impact of GST rationalisation is increasingly visible in consumption indicators, while robust agricultural activity — reflected in the strong onset of Rabi sowing and adequate reservoir levels — has reinforced the outlook for food supply and rural incomes, the Ministry's Review for the month of October states.

Corporate performance remains healthy, with sustained profitability and stable balance sheets. Domestic financial markets continue to draw strength from firm institutional participation. Meanwhile, the external sector remains shaped by a complex global environment, although the persistent strength in services exports provides an important counterbalance to the volatility in merchandise trade, the Review further states.

It highlights that the inflation outlook remains encouraging, supported by softening global commodity prices, benign energy markets, and targeted domestic supply interventions. However, the balance of risks warrants continued vigilance. Global uncertainties — including shifting trade policies, geopolitical frictions, and financial market volatility — pose potential headwinds to exports, capital flows, and investor sentiment but the economy has the potential to navigate these risks, the Review states.

It further points out that retail inflation has reached an all-time low in the current series, dropping to 0.25 per cent in October 2025, down from 1.44 per cent in September 2025. The decline can largely be attributed to the complete impact of reduced GST rates, a favourable base effect, and significant falls in food inflation.

Deflationary pressures continued in food prices, which decreased by 5.0 per cent — the steepest decline in over a decade. This was driven by price corrections in vegetables, particularly tomatoes, onions, and potatoes, as well as a continued easing in the prices of pulses. Meanwhile, core inflation held steady at 4.3 per cent, indicating stable demand conditions in the economy, the Review further states.

Overall, inflation during April-October 2025 stood at 4.8 per cent, reflecting a consistent easing of price pressures throughout the year. The Monetary Policy Committee (MPC), noting the marked easing in headline inflation, has revised its inflation projection for 2025026 to 2.6 per cent. This reflects confidence that inflation will remain well-anchored, contingent on normal weather patterns and the absence of supply-side disruptions, the report added.

- IANS