India's Industrial output rises 4% as economy shows strong resilience

Dun & Bradstreet estimates IIP growth to have moderated to 3.5 per cent in October compared with 4 per cent in September and 4.1 per cent in August due to weaker non-durable consumer output, inventory overhang, and subdued external demand. Even so, the combination of strong domestic demand, prudent monetary policy, and rising trade diversification continues to shield the Indian economy from global turbulence.

CPI inflation eased sharply to 1.5 per cent in September—its lowest level since June 2017—and is projected to fall further to 0.6 per cent in October, driven by subdued food prices and GST rationalisation effects. WPI inflation is estimated to turn negative at minus 1 per cent in October, from 0.1 per cent in September and 0.5 per cent in August. These indicators, also highlighted in the table, point to cooling input costs and improving purchasing power. While this may support short-term demand, Dun & Bradstreet notes that post-festive normalisation and muted wholesale pricing power may lead businesses to adjust production and delay restocking, Dun & Bradstreet said in a press release.

Financial conditions remained broadly stable. The 10-year G-Sec yield is estimated to have eased to 6.5 per cent in October, while the 91-day T-Bill yield held steady at 5.5 per cent for the third straight month. The repo rate remained unchanged at 5.5 per cent as the RBI kept a neutral stance, citing resilient growth and subdued inflation. Liquidity fluctuated due to festive and GST outflows, prompting the central bank to conduct multiple repo and reverse repo auctions. Bank credit growth is estimated to moderate to 9.8 per cent in October from 10.4 per cent in September. These trends are captured in the table, which shows steady short-term yields and modest credit softening.

India’s external buffers strengthened further, particularly gold reserves. The RBI’s gold holdings stood at $97.5 billion at the end of September, accounting for 13.9 per cent of total forex reserves—the highest share in more than two decades. The RBI also declared a record redemption price of ₹12,704 per unit for Sovereign Gold Bonds issued in 2020, reflecting the rise in global gold prices. The rupee averaged ₹88.6 per USD in October, with expectations of mild appreciation to ₹88 in November, consistent with the table’s exchange rate forecasts.

India’s external sector displayed resilience alongside emerging pressures. The central bank’s amendment to the Foreign Exchange Management Regulations now permits rupee-denominated lending to Sri Lanka, Nepal, and Bhutan, promoting greater regional financial integration. India drew foreign investment inflows of $7.3 billion in Q1 FY26, comprising $2.5 billion in FII inflows and $1.6 billion in portfolio investment, reflecting global investor confidence in India’s economic fundamentals.

“India’s economic trajectory continues to defy global headwinds, anchored by resilient domestic fundamentals and a benign inflation outlook. Industrial output remains robust, though signs of post-festive normalisation and inventory adjustments suggest a near-term moderation,” said Arun Singh, global chief economist, Dun & Bradstreet.

“The RBI’s neutral stance and stable yields reflect confidence in macroeconomic stability, while strategic trade diversification and rising gold reserves underscore India’s proactive positioning as a resilient and forward-looking economy amid global uncertainty. As advanced economies grapple with fiscal fragility, India’s calibrated policy mix and expanding external partnerships offer a compelling narrative of resilience and opportunity in a fragmented global landscape,” added Singh.

ALCHEMPro News Desk (SG)