Can GST cut ignite growth momentum: Finance Ministry reveals 7 key growth levers
The country is waiting with bated breath for the Q2 GDP print. Even as top estimate show chances of a 7% plus reading, India’s overall macroeconomic environment remained stable in October.
Economy resilient despite global headwinds
According to the finance ministry’s Monthly Economic Review data for October indicated a resilient domestic economy despite global uncertainties. GST rate rationalisation delivered a “measurable” boost to consumption, while easing inflation and softer merchandise exports were among the key drivers shaping the economic outlook.
“The economy enters the second half of FY26 on a stable footing, anchored by well-contained inflation, resilient domestic demand and supportive policy dynamics, even as global uncertainties warrant continued vigilance,” the government report said.
Q2 FY26 GDP estimated at 7–7.5%
With regard to growth prospects, it said that various independent economic assessments place real GDP growth for Q2 FY26 in the range of 7–7.5%, indicating continued strength in underlying economic activity. The government is due to release its Q2FY26 GDP data on November 28.
GST reform lifts activity and demand
The report noted that economic activity has gained momentum following the reduction in the Goods and Services Tax. However, “the full impact of GST rationalisation on spending behaviour would become more evident over the next two quarters,” it added.
GST collections also grew 9% in April–October, reflecting robust consumption and better compliance.
The festive season gave a further push to demand in October. Automobile retail sales hit lifetime highs, rising 40.5% YoY. Sales during the 42-day festive window surged 21%. Rural demand was strong as tractor sales touched their highest level in 11 years.
E-way bill generation, required for moving goods above Rs 50,000, rose 14.4% YoY in September–October 2025.
The report said the easing of inflation and tax benefits are expected to lift spending further in the coming quarters.
Inflation falls to historic low
GST rationalistion also resulted in retail inflation dropping sharply to an all-time low of 0.25% in October, down from 1.44% in September. Food inflation slipped 5% year-on-year, led by corrections in vegetables such as tomatoes, onions and potatoes, along with softer pulse prices. Core inflation remained steady at 4.3%.
PMI jumps to 59.2 in October
The GST relief drive momentum in production economy as well. The manufacturing PMI climbed to 59.2 in October, from 57.5 in September, helped by tax relief, productivity improvements and technology adoption. Services activity remained strong, with the PMI at 58.9.
Trade pressures persist despite, Merchandise exports drop 11.8%
The report noted, “the external environment remains characterised by elevated trade policy uncertainty, though global pressures have moderated relative to earlier peaks.”
Trade performance weakened in October. Merchandise exports fell 11.8% while imports surged 16.6%. Gold imports rose 199.2% and silver imports jumped 528.7%, reflecting rising prices. As a result, the merchandise deficit widened to $41.7 billion. However, services exports reached their highest-ever monthly level at $ 38.5 billion, helping offset 48% of the merchandise gap.
