Indian Economy Sustains Momentum While Rewiring Trade Strategy for Global Resilience

Mumbai, Oct 8 2025: Dun & Bradstreet, a global leader in business decisioning data and analytics, has released its Economy Observer report for October 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 Index of Industrial Production (IIP) stood robust at 4.0% in August 2025, a slight moderation from the revised 4.3% in July 2025, driven by a strong rebound in the mining sector and improved electricity sector output. Despite a moderation in manufacturing output, strong performance in the mining, electricity, construction and intermediate sectors signal healthy underlying growth momentum. Dun & Bradstreet expects IIP growth to have eased to 3.8% in September 2025, driven by sustained weakness in manufacturing and non-durable consumer output, and as the first full-month feedthrough effect of U.S. tariffs on Indian exports takes hold. While US tariffs are expected to impact key export-oriented sectors, the overall effect on India’s GDP remains limited given ongoing export diversification efforts, a supportive policy environment and a strong domestic market, especially robust rural demand, which continues to drive consumption.

Price Scenario: India’s inflation edged up in August 2025, with CPI rising to 2.1% from 1.6% in July 2025, the first increase in ten months driven by fading base effects and a slower contraction in food prices. Food inflation remained negative at (-) 0.7%, while core inflation rose mildly to 4.2%, driven in part by a rally in gold prices. Rural and urban CPI stood at 1.7% and 2.5% respectively, with food inflation in both segments still negative. Despite the uptick, CPI remains subdued and well within the RBI’s target threshold of 2% to 6%, supported by stable agricultural output and declining global oil (a key import) prices. Dun & Bradstreet forecasts CPI to ease to 1.8% in September 2025, driven by continued softness in food prices and the disinflationary effects of GST rate rationalization. The WPI inflation turned positive at 0.5% in August 2025, mainly due to increases in the price of vegetables and manufacturing products alongside a weakening of favorable base effects, even as prices of global mineral oil declined. WPI is estimated to ease to 0.2% in September, driven by an expected stabilization of vegetable prices and contained input costs.
 

Money & Finance: Indian financial markets remain cautiously optimistic, shaped by broadly stable yields and supportive monetary conditions. Dun & Bradstreet expects the 10-year G-Sec yield to have risen marginally to 6.6% in September 2025, while the 91-day T-Bill yield is expected to remain unchanged at 5.5%. Our forecast reflects expectations of strong economic momentum and sustained strong demand in RBI’s auctions, signaling investor confidence in short-term instruments amid comfortable liquidity. Dun & Bradstreet estimates bank credit growth to ease to 9.7% in September 2025, indicating a measured lending approach and evolving credit conditions. In the latest MPC held in October, the RBI maintained a neutral policy stance and retained its repo rate at 5.50%, marking the second consecutive pause following a cumulative 100 basis point cut earlier in the year. Overall, while monetary conditions are supportive, investor confidence remains mixed, tempered by trade tensions.

External Sector: India’s external sector exhibited mixed signals in September 2025. The rupee remained under pressure, having averaged to ?88.32/USD in September 2025; Dun & Bradstreet estimates the rupee to remain range bound in October 2025 to an average of ?88.20/USD, driven by elevated global trade tensions, sustained portfolio outflows, elevated gold imports, and an expected dip in remittances. Tariff headwinds from the US; strong services exports and strong forex reserves (which stood at USD700.2bn as of 26 September) continue to anchor external stability. Separately, government is accelerating its export market diversification efforts to mitigate risks from geopolitical tensions and US tariffs. Additionally, the India- European Free Trade Association (EFTA) pact--which was signed in 2024 has kicked in, effective 1 October 2025, and is expected to provide an alternative market for India’s exports of textiles, leather and food products.

Arun Singh, Global Chief Economist, Dun & Bradstreet said, “India's industrial output shows healthy underlying economic momentum, and inflation remains comfortably within the central bank’s target range. The RBI maintained its status quo on rates and stance reflects cautious optimism. However, external vulnerabilities particularly tariff shocks and uneven export performance underscore the need for strategic recalibration. India is actively reshaping its global trade strategy through an ongoing push towards accelerating its trade diversification efforts. The India-EFTA trade pact is likely to boost market access for India’s textile and marine exports, thereby reducing dependence on traditional markets. An opportunity driven approach will be key to navigating a complex global economic landscape.”