The GST reform will have a positive impact on the Indian economy by promoting ease of doing business, lowering retail prices, and strengthening consumption growth drivers, a RBI bulletin said on Wednesday.
It further said global uncertainty remained elevated in the wake of the imposition of US trade tariffs on major trading partners and renewed concerns over the fiscal health of advanced economies.
"The landmark GST reforms should progressively result in a sustained positive impact through significant gains in ease of doing business, lower retail prices and strengthening of consumption growth drivers," said the article on the state of the economy published in the RBI's September Bulletin.
The government has come out with the GST 2.0, a two-rate structure (5 per cent and 18 per cent), replacing the earlier four-rate duty regime. The new rates have come into effect on September 22.
The article said the Indian economy exhibited marked resilience as evident from the five-quarter high growth during Q1 2025-26, propelled by domestic drivers.
The article noted that consumer price index (CPI) based headline inflation edged up, but remained well below the target rate for the seventh consecutive month.
System liquidity remained in surplus, facilitating the pass-through of policy rate cuts, it added.
The article further pointed out that Indian equity markets witnessed bidirectional movements during August-September. India's current account deficit moderated in Q1 over the last year, supported by robust services exports and strong remittance receipts.
The decisions of the GST Council meeting in September, it said, have "set in motion major structural reforms in the GST regime, simplifying rates and processes. Beyond rate simplification, the reforms have also addressed challenges relating to inverted duty structure, and made processes business-friendly, particularly benefiting micro, small and medium enterprises, and startups".
These reforms are expected to boost tax buoyancy, improve compliance, and contribute to greater ease of living as well as ease of doing business, it added.
On the 50 per cent tariff imposed by the US on Indian shipments, the article said its immediate impact may be sector-specific, given that around 45 per cent of India's merchandise exports to the US are exempted from the tariffs, including sectors constituting major export products, particularly smartphones and pharmaceuticals.
However, despite the elevated trade policy uncertainties, merchandise exports have shown resilience during April-August 2025-26, the report said.
"While the imposition of high US import tariffs brought in some headwinds to the domestic macro-outlook, the developments since then have underscored the resilience of the economy," it said, adding that the S&P sovereign rating upgrade was an acknowledgement of its strong macro-fundamentals.
Moreover, the article said, the Q1 2025-26 GDP estimates reinforced the resilience of domestic growth drivers. High-frequency indicators for August show manufacturing and services activity at a decadal high.
"In this scenario, the growth outlook for H2 is one of optimism. Healthy corporate balance sheets and the focus on structural reforms by the government are the bright spots of the economy, " the article pointed out.
It further said global uncertainty remained elevated in the wake of lingering US trade policy uncertainties with key trading partners, renewed concerns on the fiscal health of advanced economies (AEs) and geopolitical risks.
Despite uncertainties clouding the economic outlook, the global purchasing manager's index (PMI) rose to a 14-month high in August, with manufacturing PMI moving into the expansion zone, accompanied by a robust expansion in services sector activity.
"Despite elevated global trade uncertainties, India's external sector exhibited resilience," it said.
The current account deficit moderated in Q1 2025-26 compared to the previous year, supported by strong services exports and robust remittance inflows.
These trends are expected to keep the deficit low and range-bound throughout the year.
"Net foreign direct investment (FDI) inflows reached a 38-month high in July, aided by higher gross FDI and slower repatriation and outward FDI. Foreign exchange reserves remained adequate, underscoring external sector stability," the article said.
In this scenario, the growth outlook for H2 is one of optimism. Healthy corporate balance sheets and the focus on structural reforms by the government are the bright spots of the economy.
Also, a higher kharif sowing is expected to translate to a sustained growth momentum in the agriculture sector, while also keeping food prices under check.
"The transmission of the front-loaded monetary policy easing measures has been robust. Coupled with income tax relief for households and employment augmenting measures, the stage is set for a sustained pick-up in consumption demand in H2 and potentially for a virtuous cycle of higher investments and stronger growth impulses, overcoming persistent global uncertainties," the article said.
High-frequency food price data for September so far (up to 19th) point towards a pick-up in cereal prices, it added.
Pulses recorded a mixed trend, with a decline in prices of tur/arhar dal and moong dal and an increase in gram dal price.
Among edible oils, prices firmed up for mustard, sunflower and palm oils, while groundnut oil prices eased. Prices of key vegetables (potato, onion, and tomato) softened with a notable decline in tomato prices, it noted.
The Reserve Bank of India (RBI), however, said the views expressed in the Bulletin article are of the authors and do not represent the views of the central bank.
