India’s tax and rate cuts to lift private investment: RBI

The Reserve Bank of India on Monday said the government’s domestic tax reductions and the central bank’s interest rate cuts this year will help boost private investment and economic growth. In its monthly bulletin, the RBI said the Indian economy showed signs of pickup in growth momentum in October despite global headwinds.

“Available high-frequency indicators for October suggest a robust expansion in both manufacturing and services activities, supported by festive season demand and the ongoing positive impact of the goods and services tax reforms,” the central bank said.

India cut taxes on hundreds of consumer items ranging from soaps to small cars in September to spur domestic demand in the face of economic headwinds from U.S. tariffs. The RBI has cumulatively cut its key interest rates by 100 basis points so far in 2025.

“In the midst of continuing uncertainty on global trade policies and concerns about their domestic impact, Indian economy continues to be resilient to external sector shocks,” the RBI said.

The central bank has projected the economy to grow at 6.8% in the financial year 2025–26.

Average headline inflation has fallen to an all-time low, much below the RBI’s target of 4% this financial year, the bulletin said. Headline consumer price index inflation moderated to 0.3% in October 2025 from 1.4% in September. The fall in inflation was driven by falling prices and the impact of tax cuts, amid large favourable base effects, according to the RBI.

Earlier today, RBI governor Sanjay Malhotra said in an interview with Zee Business that there was scope to further reduce interest rates, ahead of the monetary policy meeting scheduled next week.

(With inputs from Reuters)