Focus on fundamentals to keep India going, RBI bulletin

The assessment comes after India's GDP grew at a six-quarter-high pace of 8.2% in Jul-Sept despite global uncertainties.

"Continued focus on macroeconomic fundamentals and economic reforms should help unlock efficiencies and productivity gains to firmly keep the economy on the high-growth trajectory amidst a fast-changing global environment," the staff said in the monthly State of the Economy article released Monday. Comments in the article do not represent the views of the central bank.

The domestic consumption demand has been firm, thanks to the direct and indirect tax cuts rolled out by the government. Early in the year, the government announced income-tax relief in the Budget for the financial year 2025–26 (Apr-Mar), increasing the disposable income in the hands of taxpayers, which can then be channelised into the economy in the form of investments. In September, the Goods & Services Tax Council gave relief on indirect taxes, lowering GST on a slew of items.

Both measures were meant to spur consumption demand and thereby boost private investment.

"High-frequency indicators for November suggest that overall economic activity held up," according to the paper. "Demand conditions remained robust, with indicators of urban demand strengthening further."

The observations in the latest State of the Economy article show stability in India's domestic demand conditions. The RBI staff, in their previous month's article, had said the economy was showing signs of a further pick-up in momentum despite lingering headwinds in the external sector, with demand conditions showing signs of improvement due to a revival in urban demand and continued strength in rural demand.

Meanwhile, the RBI has raised its GDP growth projection for FY26 to 7.3% from 6.8%. It has also scaled up its growth estimates for the last two quarters of the year, with growth in Oct-Dec now seen at 7.0% against 6.4% projected earlier.