Private Sector Growth Moderates, Manufacturing Shows Resilience
India's private sector activity eased to a five-month low in October, as indicated by the HSBC Flash India Composite Output Index, which fell to 59.9 from 61.0 in September. This moderation was largely attributed to a slowdown in the services economy.
Conversely, the manufacturing sector demonstrated a slight pickup, with its Purchasing Managers' Index (PMI) rising. This improvement is linked to recent Goods and Services Tax (GST) rate cuts, which have helped bolster domestic demand and alleviate cost pressures.
US Tariffs Impact Exports, Trade Deal Nears
The drag from US tariffs continues to affect India's new export orders and overall business optimism. Notably, exports to the United States experienced a sharp decline in September due to these tariffs.
Despite these challenges, India and the United States are reportedly "very close" to finalizing the initial phase of a bilateral trade agreement. Officials indicate a broad convergence on most issues, with the pact aiming to more than double bilateral trade to $500 billion by 2030. However, India's Commerce Minister Piyush Goyal emphasized the nation's measured approach, stating that India would not rush into trade agreements under external pressure.
Strong Economic Growth Forecasts from IMF and Deloitte
The International Monetary Fund (IMF) has projected India's economy to grow at a healthy pace of 6.6% in FY26, an increase from 6.5% in FY25. This optimistic forecast, which positions India as the fastest-growing large economy in both 2025 and 2026, is attributed to robust Q2 growth and the implementation of GST 2.0 reforms, which are expected to offset the negative impacts of US tariffs.
Echoing this positive outlook, Deloitte India revised its FY26 GDP growth forecast to between 6.7% and 6.9%. This projection is underpinned by steady domestic demand, supportive monetary policies, and ongoing structural reforms like GST 2.0.
Surge in NRI Investments and Focus on Labor Mobility
India's economy is also benefiting from a significant increase in investments from Non-Resident Indians (NRIs). Reports indicate a 25% rise in NRI-led investments in 2025, particularly in the real estate and tech startup sectors. To further encourage these inflows, several major Indian banks have launched new savings and investment plans tailored for overseas Indians.
Furthermore, India is actively working to facilitate the export of its workforce abroad to address global labor shortages. The Ministry of External Affairs recently unveiled draft legislation for an "Overseas Mobility Bill," intended to streamline the process of connecting Indian workers to the international job market.
Stock Market Sees Correction
On October 24, Indian benchmark indices, Sensex and Nifty, closed lower, breaking a six-day winning streak. This downturn was influenced by profit-booking and concerns stemming from reports of a potential fresh US probe into China's trade practices, as well as a cautious sentiment regarding the progress of the India-US trade deal.