A further pick-up in demand conditions witnessed in October 2025 points towards a resilient growth outlook, Reserve Bank of India (RBI) officials wrote in the November edition of RBI Bulletin released on Monday.
They said despite continued global headwinds, Indian economy showed signs of a further pick up in momentum.
“Available high-frequency indicators for October suggest a robust expansion in both manufacturing and services activities, supported by festive season demand and the ongoing positive impact of the GST reforms,” they wrote in the article ‘State of the Economy’.
Stating that headline inflation had moderated and fallen to a historic low in October and remained below the target rate, they said it was significantly helped by favourable supply-side factors, including the prospects of a good kharif season and the reduction of GST rates.
Headline CPI inflation, moderated to 0.3% in October 2025 from 1.4% in September. The fall in inflation was driven by the deepening of deflation in food prices and impact of the GST rate cut on goods and services prices, amid large favourable base effects, they wrote.
The deflation in the food group deepened on account of a decline in the prices of vegetables, pulses and spices. Inflation in sub-groups such as cereals, meat and fish, milk and products, eggs, oils and fats, fruits, prepared meals, and non-alcoholic beverages moderated, they added.
“The external sector’s capacity to absorb shocks has also improved over time, building resilience amid global trade policy uncertainties,” they emphasised in the article.
Pointing out to the World Bank’s Financial Sector Assessment (FSA) report of October 2025, which highlighted a financial system growing in resilience and strength, they said the improved macroeconomic frameworks and outcomes had not only enhanced the ability of financial institutions to support the macroeconomy, but also allowed the Reserve Bank to better calibrate regulatory measures, improve the efficiency of financial intermediation, and augment the flow of credit to the broader economy.
The fiscal, monetary, and regulatory measures undertaken so far this year should pave the way for a virtuous cycle of higher private investment, productivity, and growth, leading to long-term economic resilience, the officials wrote.
The officials said global uncertainty remained elevated, although October witnessed a slight pullback after more than a year of continuous increase.
“Concerns persist about the heightened exuberance in global equity markets, raising questions about its sustainability and its implications for financial stability,” they said.
They said financial market volatility, which had moderated in October, resurged in November due to concerns over stretched valuations in AI stocks.
“In this context, concerns persist about the heightened exuberance in global equity markets, raising questions about its sustainability and the financial stability implications of any sharp correction,” they cautioned.
On the currency, they said the Indian rupee (INR) depreciated against the U.S. dollar, reflecting the impact of a stronger U.S. dollar following the U.S. Fed’s policy announcement around the end of the month.
“In mid October, however, the INR registered a brief but sharp appreciation, supported by optimism over India-U.S. trade talks and renewed net FPI inflows Consequently, rupee volatility increased marginally during the month, although it remained relatively contained compared with most major currencies,” they stated.
They said the Indian equity markets gained in October and November as optimism surrounding the India-U.S. trade deal and corporate earnings for Q2 2025-26 offset the drag from the uncertainty surrounding the U.S.-China trade negotiations.
Domestic equity markets were also supported by a moderation in crude oil prices and a policy rate cut by the U.S. Federal Reserve, they said.
Realty, oil and gas, and telecom emerged as the top-performing sectors during October. In equity markets, domestic institutional investors (DIIs) continued to be net buyers, while foreign portfolio investors (FPIs) turned net buyers in October after a phase of three consecutive months, they added.
Published – November 24, 2025 08:45 pm IST
