Impact of External and Internal Factors on the Indian Economy

The Indian economy has shown resilience against the effects of US President Donald Trump's tariffs, aided by a combination of internal factors such as the Goods and Services Tax (GST), festival season, and a favorable monsoon.

Factors Contributing to Economic Resilience

• GST and Festival Timing:
  • The GST rate cuts were strategically implemented from September 22, coinciding with the Navratri celebrations.
  • The earlier occurrence of Dussehra and Diwali, compared to the previous year, helped boost consumption sentiment.
• Improved Sales:
  • Vehicle sales saw significant increases: two-wheelers (21.8%), passenger vehicles (23.4%), three-wheelers (8.9%), and commercial vehicles (15%).
  • Tractor sales grew by 14.2% thanks to a bountiful monsoon.
• Household Consumption Recovery:
  • There was a revival in household consumption, previously in decline due to factors like a weak job market and persistent inflation.
  • Annual consumer price inflation dropped to a 99-month low of 1.5% in September, aiding this recovery.

Future Economic Outlook

• Rural Cash Flows:
  • Expectations of improved rural cash flows from a bumper kharif and the upcoming rabi harvest, coupled with the marriage season from November to March, are expected to sustain retail momentum.
• Global and Domestic Growth Drivers:
  • Exports of services fell by 5.5% in September 2025 over September 2024, while merchandise exports rose 6.8% but were 11.9% lower year-on-year to the US.
  • As international tariffs and geopolitical tensions persist, domestic factors are likely to drive growth.

Importance of Private Investment

• Investment Stagnation:
  • Despite healthy bank and corporate balance sheets, investment is stalled due to lack of demand visibility.
• Job Creation and Income:
  • Demand will only increase sustainably with job creation and higher incomes, triggering a positive economic cycle.

Social Concerns and Economic Growth

• Bihar Elections and Employment Concerns:
  • The Bihar elections highlighted voter concerns over unemployment (berozgari) and migration (palayan), emphasizing the need for gainful employment opportunities.
• Economic Development:
  • True economic growth hinges on unleashing the entrepreneurial and consumer spirit, extending beyond seasonal festivities.