India's Economic Boom: How Record Low Inflation and GST Cuts Fuel Growth

The report notes that the rationalisation of GST rates has begun to feed into the economy, pushing consumption indicators into expansion mode and supporting both urban and rural demand.

"E-way bill generation expanded by 14.4 per cent during September and October 2025 on a year-on-year basis. At the same time, cumulative GST collection growth of 9.0 per cent for Apr-Oct 2025 indicates that the underlying revenue stream has remained resilient, aided by firm consumption and improved compliance," the report notes

Retail inflation eased to an all-time low of 0.25 per cent in October 2025, supported by GST reductions, a favourable base and an 11-year steep decline in food prices, especially vegetables.

Corporate performance in Q2 FY26 remained resilient.Net sales grew 6.1 per cent YoY, while net profits surged 12.3 per cent.

'Profit margins have continued to strengthen, with PAT as a share of total income reaching an estimated 11.1 per cent--among the highest in recent years. Overall, the data suggest that corporate balance sheets remain resilient, supported by stable earnings.' the report noted.

Agriculture outlook improves with the Rabi season starting on a promising note.

Total Rabi sowing increased 14.8 per cent YoY, with wheat sowing up 19.9 per cent and gram up 8.9 per cent, aided by healthy reservoir levels and favourable moisture conditions. Kharif procurement has reached 170.9 lakh tonnes as of November 20.

External Sector supported by record services exports. While merchandise exports moderated in October due to gold and silver imports, services exports touched a record USD 38.5 billion, covering 48 per cent of the merchandise trade deficit. For April-October FY26, total exports grew 4.8 per cent, led by 9.7 per cent growth in services.

"The external environment remains characterised by elevated trade policy uncertainty, though global pressures have moderated relative to earlier peaks," the report noted.

India's foreign exchange reserves stood at USD 687 billion, providing an 11-month import cover. The rupee traded in a narrow 87.8-88.8 per USD band through October, reflecting market stability.

Equity markets continued to be supported by domestic investors and posted a strong October performance, with the MSCI India Index up 4.2 per cent. Domestic Institutional Investors (DIIs) continued to play a stabilising role, with their market share rising to 18.3 per cent, surpassing FIIs for the first time in 13 years.

Bank credit growth improved to 10.4 per cent YoY as of September. MSME lending remained strong with 19.7 per cent YoY growth and micro & small enterprise credit up 22 per cent. Loans against jewellery surged 114.9 per cent due to rising gold prices.

Labour force participation rose marginally to 55.1 per cent, while unemployment fell to 5.2 per cent in Q2 FY26. Seasonal shifts led to increased farm employment and a temporary rise in rural unemployment in October, as noted by CMIE.

Hiring outlook remains optimistic, the 2026 hiring intent is projected at 11 per cent, with significant demand in AI/ML roles. Employability has risen to 56.4 per cent, with women surpassing men for the first time.

The review concludes that India enters the second half of FY26 on a stable and resilient growth trajectory, supported by easing inflation, public capital expenditure, healthy financial markets, and firm rural-urban demand.

However, the monthly economic review warns that global uncertainties, trade policy shifts, geopolitical risks and financial volatility require continued policy vigilance.

- ANI