India's economic landscape continues to exhibit robust fundamentals and a proactive approach to global challenges, as highlighted by recent statements from top financial authorities and market performance. The Reserve Bank of India (RBI) played a pivotal role this week by announcing its monetary policy decisions and updating economic projections.
RBI Maintains Repo Rate, Upgrades Growth Forecast
In its Monetary Policy Committee (MPC) meeting from September 29 to October 1, 2025, the Reserve Bank of India decided to keep the repo rate unchanged at 5.50% with a neutral stance. This marks the second consecutive pause following a cumulative 100 basis point rate cut earlier in the year. The RBI also revised India's GDP growth forecast for FY 2025-26 upwards to 6.8% from an earlier estimate of 6.5%. Additionally, the CPI inflation forecast for FY 2025-26 was lowered to 2.6% from 3.1%. These decisions were largely seen as a balanced approach to support economic momentum while ensuring financial stability. The announcement led to a positive reaction in the Indian equity markets, with benchmark indices showing gains.
Economic Resilience Amidst Global Challenges
RBI Governor Sanjay Malhotra, speaking on Friday, October 4, 2025, affirmed India's position as an "anchor of stability in a volatile world," citing strong forex reserves, low inflation, a narrow current account deficit, and healthy bank and corporate balance sheets. He acknowledged global stock market complacency and the potential impact of US tariffs and rising global public debt but emphasized India's capacity to absorb external shocks. Finance Minister Nirmala Sitharaman echoed this sentiment, stating that India's growing economic resilience enables it to absorb external shocks and highlighted the need for an 8% GDP growth rate to achieve developed nation status by 2047. Global experts at the Kautilya Economic Conclave also lauded India's increasing global economic role. Economist Andres Velasco, however, called the US tariff policy on India a "strategic blunder" and suggested India undertake further economic reforms, including addressing non-tariff barriers and simplifying its tax system. The OECD has also raised India's 2025 GDP forecast to 6.7% from 6.3%, driven by strong domestic demand and GST reforms.
Stock Market Performance
The Indian stock market concluded a holiday-shortened week on a positive note. On Friday, October 4, the Sensex closed at 81,207.17, up 0.28%, while the Nifty ended at 24,894.25, gaining 0.23%. The banking sector demonstrated strong performance, buoyed by the RBI's upgraded GDP growth forecast and recent reforms. Metals, PSU banks, and consumer durables were among the leading sectors in gains, while IT and pharma lagged, partly due to the lack of progress on the US-India trade pact. This positive sentiment followed a decline in Indian equity markets earlier in the week (October 3) due to geopolitical tensions and rising oil prices.
Key Reforms and Sectoral Developments
Significant reforms aimed at enhancing the ease of doing business and supporting economic growth are underway. The Goods and Services Tax (GST) structure has been simplified to a two-slab system (5% and 18%), with a 40% rate for luxury and sin goods, effective September 22, 2025. This simplification aims to improve affordability for citizens, boost business competitiveness, and increase transparency. Furthermore, the India-European Free Trade Association (EFTA) trade deal came into effect on October 1, with EFTA nations committing $100 billion in investments over 15 years, a move expected to strengthen the rule of law and provide certainty for businesses in an uncertain global trade environment. However, not all sectors are flourishing; India's traditional sari business, for instance, is facing significant challenges, including a reported 50% drop in business due to Bangladesh's import ban, alongside impacts from earlier government policies and increased competition.