RBI Bulletin Highlights Indian Economy’s Resilience: GST Reforms, Low Inflation and Strong Q1 Growth

The Reserve Bank of India (RBI), in its September Bulletin, affirmed India’s economic strength driven by upgraded GST reforms, strong Q1 FY26 growth, low inflation levels, and ample liquidity, even amid global trade uncertainties and fiscal ambiguity in advanced countries.

Q1 FY26 Growth and GST Reforms at the Core of Resilience

India recorded a robust expansion in Q1 FY26 , the strongest in the last 5 quarters, powered mainly by domestic consumption and investment. The RBI attributes much of this momentum to recent GST reforms finalised on September 3, 2025, which simplified the earlier 4-slab structure into 3 primary rates: 0% or 5% for essential items, 18% for most consumer goods, and a new 40% band for luxury and sin goods. The reforms have reduced tax cascading, improved the ease of doing business, and are expected to benefit MSMEs and start-ups substantially.

Simplification and Efficiency Gains from GST Overhaul

By addressing the inverted duty structure and enabling simpler registration and return filing processes, the reformed GST framework helps reduce compliance costs and accelerates refund timelines. The change is expected to enhance consumption and tax compliance, boosting economic buoyancy. Sectors such as passenger vehicles and electronics are poised for improved performance during the festive season under the relaxed tax bands.

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Inflation Remains Controlled Amid Volatility

Although CPI inflation experienced a slight upward tick, it remained comfortably below the RBI’s upper tolerance band for the 7th successive month. The central bank’s policy environment is supported by surplus liquidity, aiding effective rate transmission and financial stability. Equity markets showed mixed trends, mirroring global uncertainties and domestic developments.

External Sector Strengthens With Moderate CAD

India’s current account deficit narrowed in Q1, mainly due to resilient services exports and strong inward remittances. These external factors add to the economy’s resistance to global shocks stemming from trade tariffs and fiscal pressures in developed markets.

Conclusion

The RBI’s September 2025 Bulletin paints a confident picture of India’s economic resilience, thanks to domestic policy reforms like GST rationalisation, controlled inflation, sustained capital inflows, and robust Q1 growth. These fundamentals position the country to better navigate global economic fluctuations in the near term.

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