India's economic landscape is currently marked by significant policy reforms and an optimistic assessment from the Reserve Bank of India (RBI). A key highlight is the implementation of GST 2.0, a new two-rate structure (5% and 18%) that came into effect on September 22, replacing the previous four-rate system. This reform is expected to have a positive impact on the economy by promoting ease of doing business, lowering retail prices, and boosting consumption growth drivers.
The RBI's September bulletin projects an upbeat outlook for the Indian economy in the second half (H2) of 2025-26, anticipating a "virtuous cycle" of higher investments and stronger growth, despite persistent global uncertainties. The economy demonstrated remarkable resilience with a five-quarter high growth in Q1 2025-26, propelled by domestic factors. Inflation, measured by the Consumer Price Index (CPI), remained well below the target rate for the seventh consecutive month, even after a slight increase. Furthermore, system liquidity remained in surplus, aiding the transmission of policy rate cuts, and net Foreign Direct Investment (FDI) inflows reached a 38-month high in July.
The external sector also exhibited resilience, with a moderated current account deficit in Q1, supported by robust services exports and strong remittance inflows. The Finance Minister, Nirmala Sitharaman, also launched the GST Appellate Tribunal (GSTAT) portal, aiming to reduce tax litigation, with hearings scheduled to commence in December. Analyst Manish Chokhani underscored the critical role of these GST reforms in stimulating demand and creating jobs for India to maintain its position as a major global economy. The impact is already being felt, with e-commerce platforms and logistics companies gearing up for a festive season surge, expecting increased consumer spending due to GST benefits. Maruti Suzuki is reportedly set to reduce small car prices by Rs 1.29 lakh as a direct consequence of GST 2.0.
In the financial markets, Indian equities experienced bidirectional movements in August-September, with some analysts predicting a cyclical upswing due to GST 2.0 and policy tailwinds. However, domestic equity markets saw a fourth consecutive day of decline, influenced by concerns over US H-1B visa rules and persistent selling by foreign investors. The GIFT Nifty indicated a lower start for Thursday's trading session. On a positive note, pharmaceutical and healthcare firms are preparing for a significant Initial Public Offering (IPO) wave, aiming to raise approximately ā¹13,000 crore over the next nine months. Other notable business developments include JSW Group's plans to raise ā¹7,000 crore via Non-Convertible Debentures (NCDs) for the acquisition of AkzoNobel India, and Quest Global's pre-IPO funding round targeting $200-$225 million.