The Reserve Bank of India (RBI), in its September Bulletin, highlighted the resilience of the Indian economy, driven by strong domestic demand, GST reforms, and low inflation, despite global uncertainties such as U.S. trade tariffs and fiscal pressures in advanced economies.
Q1 FY26 Growth
The economy recorded a five-quarter high expansion in Q1 FY26, powered largely by domestic consumption and investment, signaling robust underlying momentum.
GST Reforms to Boost Consumption and Ease of Business
The RBI underscored the landmark Goods and Services Tax (GST) reforms approved on 3 September, noting their potential to:
- Lower retail prices and improve consumption
- Streamline compliance through simpler registration, easier returns, faster refunds, and reduced costs
- Address the inverted duty structure, benefiting MSMEs and start-ups
The GST overhaul consolidated rates into primarily 5% and 18%, with a 40% band for luxury and sin goods, while essentials largely attract nil or 5%. Passenger vehicle sales are expected to rise during the festive season following tax cuts.
Inflation and Financial Stability
CPI inflation remained below target for the seventh consecutive month, supporting a stable macroeconomic environment. Surplus liquidity aided the transmission of policy rate cuts, while equity markets experienced bidirectional movements.
External Sector and Outlook
India’s current account deficit moderated in Q1 FY26, supported by strong services exports and robust remittance inflows, highlighting the economy’s resilience to external shocks.
The RBI clarified that the views expressed in the Bulletin are those of the authors and do not represent the central bank’s official stance.
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