Key Takeaways
- India’s economy shows strong momentum despite global challenges
- Festive demand and GST reforms drive manufacturing and services growth
- Private corporate sales grew 8% in Q2 FY26, up from 5.5% in previous quarter
- Inflation remains at historic low, well below target rate
The Reserve Bank of India’s latest ‘State of the Economy’ report indicates significant economic acceleration, driven by festive season demand and recent GST reforms. Despite ongoing global challenges, both manufacturing and services sectors showed robust expansion in October.
Economic Momentum Strengthens
RBI confirmed that inflation has moderated to a historic low and remains well below the target rate. The central bank noted, “Financial conditions remained benign, and the flow of financial resources to the commercial sector increased significantly from a year ago.” The report was released on November 24.
GST Reforms Take Effect
The landmark Goods and Services Tax reforms implemented on September 22 represent a major shift in India’s indirect taxation system. The changes merge four tax slabs into two primary rates of 5% and 18%, with a special 40% slab for “sin goods.”
The GST council, led by Finance Minister Nirmala Sitharaman, announced this comprehensive overhaul in early September. The reforms aim to simplify tax structure, boost consumption, and rationalize rates across sectors.
Private Sector Performance
RBI data reveals strong performance in the private corporate sector during Q2 2025-26. Overall sales of listed private non-financial companies grew 8% year-on-year, significantly better than the 5.5% growth recorded in Q1.
Sector-wise breakdown:
- Manufacturing firms: 8.5% sales growth, led by automobiles, food products, electrical machinery, and chemicals
- IT sector: 7.8% sales growth, improving from 6% in previous quarter
- Non-IT services: Strong 10.6% growth, driven by wholesale and retail trade
However, manufacturing companies’ Interest Coverage Ratio (ICR) dipped to 8.6, indicating reduced capacity to service debt obligations.
