India's Economic Resilience and Growth Momentum Set to Accelerate in H2 2025

The Reserve Bank of India's latest monthly bulletin released on September 24, 2025, projects a buoyant outlook for the Indian economy in the second half (H2) of the fiscal year. Despite persistent global uncertainties and tariff-related headwinds, India is poised for a sustained pick-up in consumption demand and higher investments, driven by multiple structural reforms and supportive monetary measures.

Key Highlights

- GST reforms implemented in September 2025 have simplified tax rates and addressed structural challenges like the inverted duty structure. These measures are expected to reduce retail prices significantly, aiding consumption growth and improving the ease of doing business, particularly benefiting micro, small and medium enterprises (MSMEs) and startups.
- The RBI has cut policy rates by 100 basis points earlier in 2025 but held steady at the August meeting. The current surplus liquidity and transmission of rate cuts are expected to further stimulate demand.
- Corporate balance sheets remain healthy, and government structural reforms bolster investor confidence, setting the stage for higher investments in H2.
- Agriculture sector prospects are positive with increased kharif sowing, helping stabilize food prices and supporting rural consumption.
- High-frequency indicators show manufacturing and services activities at decade-high levels as of August 2025, reflecting robust economic activity.
- Despite challenges from high US import tariffs imposed on Indian goods, the economy has demonstrated resilience with GDP growth far exceeding expectations at 7.8% in Q1 FY26.
- Income tax relief measures and employment initiatives complement these dynamics, potentially creating a virtuous cycle of consumption and investment-led growth.

Outlook for H2

The RBI's optimism is anchored on the interplay of tax reforms, accommodative monetary policy, improved business sentiment, and government reforms. These factors collectively are expected to overcome external challenges, enabling stronger growth momentum. The sustained consumption demand fueled by tax reform benefits and monetary stimulus is poised to translate into higher corporate investments, reinforcing India's growth trajectory despite global headwinds.

Source: Reserve Bank of India Bulletin