India’s growth momentum strengthens on festive demand, resilient consumption: RBI Bulletin
“The Indian economy has shown signs of further recovery in momentum despite persistent headwinds in the external sector. Demand conditions have shown signs of improvement, with urban demand picking up and rural demand continuing to strengthen,” the central bank said.
Overall demand conditions improved during the month and increased significantly, driven by rural consumption. Rural demand is “driving overall demand”, benefiting from healthy monsoon progress, strong agriculture sector activity and the mitigating impact of GST rate revisions that have helped sustain spending power outside urban centres, the RBI said.
Not all high-frequency indicators moved in the same direction. Electricity demand weakened as the central bank attributed this decline to unseasonal rainfall and the early start of winter, reducing the need for cooling. Fuel consumption also showed a mixed trend: While demand for gasoline increased with increased mobility and holiday travel, a slight decrease was recorded in diesel use.
Digital payments, another closely watched indicator of consumption and formalization, also showed a moderation in both value and volume in October 2025. However, the RBI highlighted that recent data continues to point to a rise in the adoption of digital payments across regions and business categories, including groceries, supermarkets and even gold purchases (traditionally cash-intensive transactions).
Inflation falls sharply to record low
India’s inflation trajectory has also strengthened the macroeconomic outlook; Headline retail inflation fell to its lowest level in the current CPI series (2012 base year). The underlying CPI fell sharply to 0.3 percent in October 2025, compared to 1.4 percent in September; This was helped by deep deflation in food prices, the impact of GST rate cuts on goods and services and a positive base effect. The food basket poses the biggest drag on inflation as prices of vegetables, pulses and spices have fallen further, the RBI noted. Inflation slowed in a wide range of sub-items, including cereals, meat and fish, milk and dairy products, eggs, oils and fats, fruits, ready meals and soft drinks, strengthening the downward trend in food inflation. Fuel and mild inflation remained stable at 2.0 percent in October, unchanged from September. According to the Central Bank’s observation, while LPG inflation remained high, electricity-related inflation remained low and stable.
Core inflation, excluding food and fuel, also slowed down, falling to 4.3 percent in October from 4.4 percent in the previous month. This softening was led by categories such as clothing and footwear, health, recreation and entertainment, transportation and communications. However, inflation rose further in segments such as education, pans, tobacco and intoxicants, and personal care and goods.
The core CPI basket, excluding precious metals, actually recorded a small monthly decline of 0.1 per cent, reflecting the impact of recent GST rate cuts on price trends in various goods and services, the RBI added.
