Stage is set for 'virtuous cycle' of investment

Projecting an upbeat outlook for the Indian economy in the second half (H2) of 2025-26 (FY26), the Reserve Bank of India's monthly bulletin on Wednesday reckoned that the stage is set for a sustained pick-up in consumption demand and 'potentially for a virtuous cycle of higher investments and stronger growth impulses, overcoming persistent global uncertainties'.

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Hailing the 'landmark reforms' of the Goods and Services Tax (GST) regime as a key driver for consumption growth, a report on the state of the economy in the RBI bulletin argued that the lower GST rates, combined with the income tax relief for households and employment augmentation measures, would strengthen consumption growth drivers. Moreover, the robust transmission of the 100 basis points (bps) reduction in the policy repo rate, higher kharif sowing and healthy corporate balance sheets are expected to aid this uptick, the report said.

I Pointing to high frequency indicators i in August that show manufacturing and 3 services activity at a decadal high, the report concluded that "the growth outlook for H2 is one of optimism," the report said.

It also highlighted that foreign direct investment (FDI) inflows reached a 38-month high of $5 billion in July.

The RBI had projected FY26 GDP growth at 6.5 per cent with Q3 at 6.6 per cent and Q4 at 6.3 per cent.