Signs of improvement in demand in September, high US tariffs not a major growth concern: RBI Bulletin

According to data from the Society of Indian Automobile Manufacturers (SIAM), two-and three-wheeler sales rose 6.7 per cent year-on-year and 5.5 per cent in September, respectively, while passenger vehicle sales were up 4.4 per cent. Meanwhile, Tractor and Mechanization Association data showed tractor sales were up 42.9 per cent.

On the whole, the RBI article said, high-frequency data for September was “robust”, with GST e-way bill generation at a record high as businesses stocked up ahead of the festive season, with the government’s Goods and Services Tax (GST) cuts – which came into effect on September 22 – aiding demand.

“Average (digital) daily payments value in September witnessed the sharpest month-on-month uptick in 2025-26 so far. This could possibly reflect a significant pick-up in festive season demand, aided by the GST rate reductions and offers on e-commerce platforms,” the article said.

The comments by the RBI economists – the views expressed in the aforementioned article are those of the authors and don’t represent the views of the central bank – come after senior union ministers on Saturday made note of the same, saying that a sharp jump in sales, especially of electronics and consumer goods, and reduced prices of key daily-use items may provide a significant push to consumption and even reflect in the GDP numbers for the current fiscal. At a joint conference named ‘GST Bachat Utsav’, Finance Minister Nirmala Sitharaman, Commerce and Industry Minister Piyush Goyal, and Information & Broadcasting Minister Ashwini Vaishnaw said the benefits of the GST rate cuts are reaching households and have led to consumers increasing their purchases. This, in turn, will drive investments.

India posted a GDP growth rate of 7.8 per cent in April-June, the highest in five quarters. Data for July-September, which will be released at the end of November, is expected to show a moderation to 7 per cent, according to the RBI’s official forecast.

No major tariff risk

On the trade front, the RBI article reiterated that the Indian economy’s reliance on domestic sources of demand meant the high US tariff of 50 per cent on Indian exports “do not pose a major concern for the overall growth”.

“Despite turbulence in the external sector, India’s merchandise trade during H1:2025-26 remained resilient. During H1, the merchandise trade deficit was higher than that of last year, primarily driven by oil and electronic goods. Exports to the US, which had been buoyant up to August, contracted thereafter, partly reflecting the impact of the 50 per cent tariffs,” the article said.

As per Commerce Ministry data released last week, India’s merchandise exports were up 7 per cent in September and 3 per cent in April-September. The merchandise trade deficit last month was at a 13-month high of $32.1 billion.

However, despite the relatively lower risk faced by India from the tariff war, the RBI article warned that economic resilience is a “key priority” given the uncertainties from the global economy and policies.

“While the Indian economy is not immune to global headwinds, it has so far exhibited resilience, driven by a focus on strong and durable macroeconomic fundamentals – including low inflation, robust balance sheets of banks and corporates, adequate foreign exchange reserves and a credible monetary and fiscal framework.”