Highlights broad-based domestic momentum and easing inflation despite rising trade pressures

Mumbai, September 12, 2025: Dun & Bradstreet, a global leader in business decisioning data and analytics, has released its Economy Observer report for August 2025. Economy Observer is a monthly report sharing in-depth analysis of key macroeconomic developments in India and provides forecasts for key economic indicators, and insight into the expected direction of the Indian economy.

Key economic forecast:

Real Economy: India’s economy showed encouraging signs of growth in the first quarter of FY 2026 with GDP rising by 7.8% year-on-year with the Index of Industrial Production (IIP) growing by 3.5% in July 2025, led by gains in manufacturing especially in basic metals, electrical equipment, and non-metallic mineral products. Dun & Bradstreet expects IIP to have grown by 6.0% in August 2025, supported by steady demand in construction-related sectors, and a favorable base effect. In parallel, the government is preparing to introduce a new GST reform by Diwali (October 2025), which aims to reduce tax burdens on essentials, packaged food and electronics, fix inverted duty structures, and make compliance easier for small businesses. However, trade concerns persist, especially with the United States having imposed a 50% tariff on Indian exports from August 27. The tariff could impact sectors like textiles, jewellery, and electronics, prompting India to seek new trade partners in Africa, Latin America, and East Asia to cushion the blow.

Price Scenario: India’s inflation continues to ease, reinforcing price stability across both retail and wholesale levels. Consumer Price Index (CPI) inflation moderated to 1.6% in July 2025, the lowest in over eight years, driven by a sharp decline in food prices. Both rural and urban CPI inflation dropped, to 1.2% and 2.1% respectively, with food inflation in both segments turning negative due to falling prices of vegetables, pulses, cereals, and sugar. This broad-based cooling is being supported by a favorable monsoon, robust kharif sowing and stabilized agricultural output expectations. Dun & Bradstreet forecasts CPI inflation to stabilize at 1.6% in August 2025, maintaining the low trajectory. On the wholesale front, Wholesale Price Index (WPI) inflation declined by 0.6% in July 2025, and Dun & Bradstreet forecasts WPI inflation to remain at negative 0.2% in August 2025. Our forecast of sustained decline in WPI inflation, reflects softening input costs and an expected continued fall in global mineral oil prices.

Money & Finance: Indian investors showed signs of caution in August 2025 amid global uncertainties.

Dun & Bradstreet forecasts the 10-year G-Sec yield to remain steady in August 2025 at 6.4%, supported by selective investor interest and RBI’s liquidity support. The 91-day T-Bill yield is also expected to remain unchanged at 5.4%, reflecting strong demand in RBI’s auction and short-term liquidity comfort. Bank credit growth is projected to accelerate to 11.2% in August, up from 9.6% in July 2025, driven by festive season demand, improved credit access, and lower borrowing costs. The RBI maintained its repo rate at 5.50% and a neutral policy stance, signaling a wait-and-watch approach as inflation trends stabilize. Liquidity remained in surplus, with ?1.79 lakh crore absorbed via the Standing Deposit Facility and reverse repo operations. Overall, while monetary conditions are supportive, investor confidence remains mixed, encouraged by policy continuity but tempered by trade tensions, fiscal risks, and cautious global sentiment.

External Sector: Dun & Bradstreet anticipates that the Indian rupee will remain under moderate pressure in September 2025, averaging around ?87.2/USD, marginally stronger than ?87.4/USD in August 2025. While global uncertainties continue to influence currency markets, domestic factors such as strong services exports and potential Reserve Bank of India (RBI) intervention are expected to provide support. Competitive pressures in key export sectors and evolving global trade dynamics may weigh on sentiments.

Arun Singh, Global Chief Economist, Dun & Bradstreet said, “India’s growth trajectory remains steady, anchored by strong domestic demand and policy reforms, though sustaining momentum hinges on managing external shocks and capitalizing on structural shifts. In Q1 FY26, real GDP outperformed expectations, marking the fastest expansion in five quarters, driven by robust private consumption and investment, which offset trade headwinds as net exports dragged. External trade is likely to stay vulnerable to global dynamics, underscoring the need for diversification and policy support. GST rationalization is expected to lift urban consumption, complementing already resilient rural demand and cushioning the impact of export losses from higher tariffs.”