Domestic Macroeconomic Highlights – October, 2025

Inflation:

India’s consumer price inflation edged higher to 2.07% year-on-year (YoY) in August 2025, up from a revised 1.61% in July – the first monthly uptick in ten months. Food prices, a key driver of the CPI basket, declined by 0.69%, moderating from July’s 1.76% fall. Price pressures rose modestly in categories such as pan, tobacco, and intoxicants (2.49% vs. 2.45% in July) and miscellaneous items (5.05% vs. 5.01%). In contrast, housing (3.09% vs. 3.17%) and fuel and light (2.43% vs. 2.67%) registered a slower pace of increase.

GST Collections:

Gross Goods and Services Tax collections stood at ₹1.89 lakh crore in September, reflecting a 9.1% YoY increase. This represents the fastest growth in four months (compared with 6.5% growth in August) and is the ninth consecutive month that collections have remained above the Rs 1.8 lakh crore mark. However, the collections in the second quarter were Rs 5.71 lakh crore, a 7.7% YoY growth, which was a slowdown from the 12% YoY growth witnessed in the previous quarter. The surge comes despite subdued non-durable consumer spending ahead of the GST rate cuts, which took effect on September 22, 2025.

India Manufacturing PMI Cools Slightly in September

The HSBC Manufacturing Purchasing Managers’ Index (PMI) eased slightly to 58.5 in September 2025, from August’s 17.5-year high of 59.3. While this marks a moderation, the index remains well above both the neutral 50.0 threshold and the long-run average of 54.2, reflecting robust expansion. New orders continued to grow strongly, albeit at a slower pace, while firms reported accelerated input cost inflation. Output charges rose at the fastest rate in over 12 years, though business optimism for future activity remains high.

India’s Fiscal Deficit Reaches 38.1% of FY26 Target by August

India’s fiscal deficit in the April-August period of the financial year 2025/2026 stood at 5.98 trillion rupees ($67.34 billion), or 38.1% of the full-year target, which is wider as against the comparable year-ago period, when it stood at 27%. Total government expenditure for this period rose to 18.8 trillion rupees, compared with 16.5 trillion rupees a year earlier. Crucially, Capital Expenditure increased significantly to 4.3 trillion rupees, up from 3 trillion rupees a year ago. However, Net tax receipts decreased to 8.1 trillion rupees, down from 8.7 trillion rupees collected in the same period last year, while non-tax revenue rose to 4.4 trillion rupees compared with 3.3 trillion rupees a year ago.

OECD lifts India’s FY26 growth outlook to 6.7%; S&P retains at 6.5%

The OECD revised India’s FY26 GDP growth forecast upwards by 40 basis points to 6.7%, attributing the improvement to monetary easing, fiscal support, and GST reductions. It also projects average consumer inflation to decline sharply to 2.9% in FY26, from 4.1% previously, and stabilize near 3% in FY27. Meanwhile, S&P Global retained its forecast at 6.5% for FY26 and anticipates a 25-basis-point rate cut by the Reserve Bank of India during the fiscal year.

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Source: HDFC Tru; www.hdfc-tru.com  Email : tru@hdfcsec.com ; Phone: 9930203944

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