State of the economy: How macroeconomic indicators performed in September 2025?
News Summary
In September 2025, India's economy showed significant developments. The government implemented GST 2.0 to ease tax burdens and stimulate consumption. The Reserve Bank of India (RBI) maintained a neutral monetary stance, keeping markets focused on a potential December interest rate cut. Strong credit growth in private banks and retail financing, with robust lending momentum reported by ICICI Bank and Axis Bank, highlighted resilient domestic demand. Retail inflation eased to 1.54%, GST collections rose to INR 1.89 lakh crore, and UPI transactions reached 19.63 billion. Employment improved slightly, with LFPR at 55.3% and unemployment at 5.2%. Manufacturing and services sectors continued to expand, with the HSBC Manufacturing PMI at 57.7 and Services PMI at 61.2, indicating sustained demand despite mild moderation.
Background
The Indian economy in 2025 continues to undergo structural reforms and macroeconomic adjustments. The implementation of GST 2.0 is the latest government initiative aimed at boosting consumption and addressing regressive taxation, building upon earlier GST reforms. The Reserve Bank of India's monetary policy plays a crucial role in balancing economic growth and inflation control. The prevailing global economic environment, including potential U.S. tariffs, also presents external impacts on India's trade and manufacturing activities. Domestic consumption, investment, and the digitalization of payment systems like UPI are significant drivers of India's economic resilience.
In-Depth AI Insights
What is the delicate balance between the RBI's anticipated rate cut and underlying inflationary pressures? - While retail inflation (CPI) significantly dropped to a multi-year low of 1.54%, core inflation rose to 4.5% due to higher gold and housing costs. This suggests that the headline deceleration is largely driven by volatile food and fuel prices, while underlying structural inflationary pressures persist. - The RBI's lowered FY26 inflation forecast to 2.6% and hints at a potential 25 bps rate cut in December might reflect confidence in the sustained impact of GST reforms and soft food prices. However, rising core inflation could limit the extent of future monetary easing and prompt the RBI to remain cautious in its actions, preventing a rebound in inflation once food and fuel price volatility subsides. How does the introduction of GST 2.0, coupled with robust domestic demand and strong credit growth, profoundly impact India's investment landscape? - GST 2.0, aimed at easing household tax burdens and stimulating consumption, is likely to directly boost consumption-driven sectors such as retail, FMCG, and consumer durables. Increased disposable income will improve corporate earnings prospects for these industries, attracting further investment. - Robust credit growth, particularly across SME, corporate, and retail segments, indicates an intrinsic momentum for investment and business expansion. The banking sector, including lenders like ICICI Bank and Axis Bank, stands to benefit from a healthy credit cycle. Stable GST revenue growth for the government also provides headroom for infrastructure spending and fiscal stability, further supporting the overall investment environment. Amidst global trade tensions, what does the rise in India's export orders signal about its role in the global supply chain? - Despite potential U.S. tariffs on Indian goods and a slight moderation in manufacturing PMI, the rise in export orders suggests growing competitiveness for Indian goods in global markets, particularly outside the U.S. This could indicate that Indian exporters are actively diversifying markets to hedge against geopolitical risks and single-market dependency. - This resilience likely reflects India's increasing attractiveness as an alternative manufacturing hub, especially in the context of global supply chain 'China+1' strategies. India is gradually integrating into more diversified and resilient global trade networks, which could afford it a strategic advantage in a reshaped global trade landscape.