Summary of this article
GST reforms simplify business, reduce costs, lower prices.
Household consumption growth strengthens economy amid global uncertainty.
Stable inflation, ample liquidity boost spending, credit access.
The Reserve Bank of India (RBI) has signalled that the recent Goods and Services Tax (GST) reforms will bring long-term benefits to the Indian economy. The central bank, in its bulletin for September 2025, noted that the reforms would increase the ease of doing business, lower retail prices, and make consumption a potent growth driver.
RBI Bulletin On The State Of The Economy
RBI, on September 24, 2025, released its monthly bulletin that included one speech, seven articles, and new statistics. Among these, the article titled State of the Economy touched upon the overall performance of the Indian economy during times of uncertainty in the world. In the article, it was mentioned that the GST reforms will continue to have positive impacts, including simpler business operations and better demand by households.
The bulletin also added that the Indian economy had been standing firm, driven largely by domestic drivers. India saw its highest growth rate in five quarters during the first quarter of 2025-26, where consumption was a prime driver.
GST Reforms And Expected Role
The bulletin explained that the GST measures sought to reduce complexities in tax compliance and increase transparency. Businesses are to benefit from lower administrative costs and smoother operations. With the trickle-down effect, retail prices will decline, paving the way for higher household spending.
This expansion in consumption, the bulletin states, is to be one of the prime drivers of India's economic growth. Consumption demand already was one of the strongest domestic drivers in the last quarter, and the new GST reforms are seen as supporting the trend.
Inflation Trends And Price Stability
RBI also noted that the consumer price index (CPI) headline inflation had recently moved up. However, it remained in line below target for the seventh consecutive month. The uniformity of stable inflation, even as global trade and fiscal front uncertainties persist, reflects a good domestic environment.
By keeping inflation at manageable levels, the economy will be able to effectively work towards making consumers benefit from the blessings of cheaper retail prices from GST reforms. This creates a virtuous circle where price stability fuels strengthened demand, and strengthened demand fuels persisting economic momentum.
Liquidity And Policy Transmission
The bulletin added that liquidity in the system remained in surplus. This condition allowed earlier policy rate cuts to spill over into terms of lending and borrowing in the financial system. Adequate liquidity has helped banks and financial institutions pass through cuts in rates more effectively, lowering the price of credit and making it more accessible.
This economic environment supports the positive effect projected from the GST reforms. With lower retail prices and easier access to credit, businesses and households will likely enjoy more favourable investment and spending conditions.
Global Context And Domestic Resilience
The State of the Economy report also placed India's progress into context compared to global developments. It highlighted that there was high uncertainty in the world, particularly due to the fact that the United States had imposed tariffs on major trading partners and fears over the fiscal health of advanced economies.
Even in the midst of these foreign threats, India posted strong growth during the first quarter of 2025-26. RBI credited domestic demand as being largely responsible for this strength. Services exports and steady remittances contributed further to the current account balance, and equity markets posted mixed trends in August and September.
Broader Economic Indicators
Apart from GST-related observations, the bulletin also included an overview of other sectors. Liquidity position was reported as favourable, equity markets varied, and non-food bank credit flow posted moderation during 2024-25. This was, however, met with increased funding from avenues other than banks, including equity issues and external credit.
The bulletin included news stories on the functioning of non-banking financial companies (NBFCs), the impact of the Unified Payments Interface (UPI) on cash demand, and consumption inequality analysis with the National Sample Survey. All the stories referenced different aspects of the economy, but the general theme of the State of the Economy article remained the positive long-term contribution of GST reforms.
