India's economic activity has accelerated on both supply and demand fronts following the recent rationalisation of GST rates, the Finance Ministry said in its Monthly Economic Review for October. The ministry noted that the positive impact of reduced GST rates is becoming increasingly evident across consumption and production indicators, signalling broad-based economic resilience.
According to the review, well-anchored inflation expectations, sustained public capital expenditure, rural revival, and firm urban consumption have collectively strengthened the economy's footing, offering a stable outlook for the remainder of FY26.
GST Rationalisation Strengthens Consumption Trends
The ministry highlighted that lower GST rates have contributed to higher consumer spending, reflected in rising high-frequency consumption indicators. With inflationary pressures easing due to soft global commodity prices, stable energy markets, and targeted domestic supply measures, the government expects the inflation trajectory to remain favourable. However, it cautioned that global uncertainties warrant continued vigilance.
Agriculture Lifts Rural Outlook Amid Strong Rabi Sowing
A key driver of the improved outlook is the robust agricultural performance, supported by a strong start to rabi sowing and comfortable reservoir levels. This is expected to bolster food supply and enhance rural incomes, further strengthening domestic demand.
Global Headwinds Persist Despite Moderation in Pressures
Even as some global trade pressures have moderated due to recent international agreements, the ministry warned that geopolitical tensions, shifting trade policies and market volatility continue to pose risks to exports and investment flows. The review also pointed to elevated uncertainty due to the absence of sustainable, transparent trade frameworks among major economies.
While frontloading of export orders boosted trade activity in 2025, ongoing global fragmentation may limit sustained gains. Additionally, the actual effective tariff rate continues to lag due to factors such as stockpiling, tariff pauses and trade rerouting.
October Trade Data Shows Mixed Trends
India's merchandise exports contracted by 11.8% in October, even as imports surged 16.6%, widening the trade deficit. However, the services sector continued to remain a bright spot. Services exports rose 11.9% to $38.5 billion, marking the highest monthly services export value ever, helping cushion the dip in goods trade.
Diversified Trade Strategy in Motion
To preserve trade momentum, India is actively pursuing a diversified strategy through multiple trade pacts. The ministry referenced the newly concluded Comprehensive Economic Trade Agreement (CETA) with the UK, and ongoing FTA talks with the EU, US, New Zealand, Chile, and Peru.
Bank Credit Growth Shows Signs of Reacceleration
The review pointed to early signs of a rebound in bank credit growth, driven largely by personal loans and continued MSME lending. September saw the highest credit growth rates in FY26 so far, with personal loans expanding 11.7%.
A notable highlight was a 114.9% surge in loans against gold jewellery, attributed to rising gold prices and increased reliance on gold-backed credit among households and businesses.
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