India's economy continues to exhibit significant resilience amidst global uncertainties and weak external demand, as per the Reserve Bank of India's (RBI) October Bulletin. The report emphasizes strong domestic drivers, including a revival in urban demand and robust rural consumption, coupled with a positive agricultural outlook. Business confidence in both manufacturing and services sectors has reached a six-month peak, reflecting growing optimism.
Inflation has notably moderated, with the headline Consumer Price Index (CPI) inflation in September marking its lowest reading since June 2017, largely due to deflation in food prices. This easing of inflationary pressures has created crucial policy space for further supporting economic growth. International organizations like the IMF, OECD, and the World Bank have revised India's GDP growth forecasts upwards for 2025, with the RBI also raising its projection to 6.8% for the current year.
The central bank anticipates that festive demand and recent GST rate cuts will further boost production and enhance affordability. Domestic structural reforms are playing a vital role in offsetting the drag from weakening external demand conditions. However, the rupee experienced depreciation against the US dollar in September, attributed to elevated trade tensions, global uncertainties, and persistent foreign portfolio investment (FPI) outflows. Gross inward Foreign Direct Investment (FDI) also moderated in August, with net FDI turning negative due to increased repatriation.
On the business front, Indian financial markets, including the BSE and NSE, are largely closed today, October 21, in observance of Diwali Laxmi Pujan. A special one-hour Muhurat trading session is scheduled to take place from 1:45 PM to 2:45 PM, marking the auspicious beginning of the Hindu financial year, Samvat 2082. Market watchers are optimistic about an earnings-driven recovery for Indian markets in the new Samvat, with sectors like automobile, logistics, chemicals, and power identified as top picks. Similarly, banks in several states are also observing holidays for Diwali celebrations.
India is also increasingly being recognized as a global hub for services exports, demonstrating a compound annual growth rate of 14.8%, significantly outpacing goods exports.