India's economy poised for strong FY26 growth amid policy reforms and stable inflation: Finance Ministry

New Delhi [India] October 27 (ANI): India's economy continues to gather pace, with recent government reforms and monetary measures expected to sustain growth momentum while keeping inflation in check, according to the Monthly Economic Review for September 2025 released by the Department of Economic Affairs, Ministry of Finance.
The report highlights that recent policy steps, including GST rate rationalisation, are likely to maintain inflation at moderate levels while supporting consumption demand. "Overall prices are likely to remain soft in FY26," the review said, noting that the average headline inflation for 2025-26 has been revised down to 2.6 per cent from 3.1 per cent in August and 3.7 per cent in June.
Despite a moderation in the growth of bank credit, the overall flow of financial resources to the commercial sector continues to rise, with non-bank sources increasingly filling the gap. "the overall flow of financial resources to the commercial sector continues to rise as non-bank sources of funding are gaining prominence and offsetting the decrease in the flow of bank credit." the report stated, signalling the growing role of market-based financing in supporting investment and enterprise activity.
The Reserve Bank of India's latest Developmental and Regulatory Policies, introduced to strengthen financial stability are expected to enhance credit allocation efficiency, bolster banking sector resilience, and integrate India's economy more seamlessly into global financial markets. "The full implementation of the RBI's latest Developmental and Regulatory Policies is anticipated to enhance the efficiency of credit allocation, strengthen the resilience of the banking sector, and facilitate the economy's integration into global financial markets under more favourable conditions." noted the report
On the fiscal side, the government's GST 2.0 and rate rationalisation efforts have already begun to reflect in higher consumer spending, with festive demand boosting industrial and services output. The report notes that the lower GST rate is expected to support a positive demand outlook by reducing the tax burden on consumers and businesses, thereby stimulating both consumption and investment and boosting employment generation across sectors.
A strong performance in the industrial and services sectors, combined with a stable labour market, is projected to further strengthen domestic demand. The report cites robust job creation and optimistic hiring sentiment, with formal employment rising and high-frequency indicators such as e-way bills and UPI transactions showing steady growth.
However, the Ministry cautioned that global uncertainties will continue to pose downside risks to external demand. "While global headwinds warrant caution, growth-enhancing structural reforms and government initiatives, including GST 2.0, are expected to mitigate some of the negative impacts," the report added.
On the agricultural front, Kharif sowing has been completed successfully, with cereals and pulses showing healthy growth despite localised crop damage from extreme weather. This strong agricultural performance, the review noted, would underpin rural income and ensure market stability.
India's trade performance also remains robust, with services exports offsetting the merchandise trade deficit.
Both the IMF and the RBI have revised India's GDP growth forecasts upward to 6.6 per cent and 6.8 per cent, respectively, underscoring the country's strong macroeconomic fundamentals amid global volatility. (ANI)