Economic Momentum Holds Firm In November Despite Signs Of Mixed Demand: RBI

India’s economic activity remained resilient in November, supported by robust demand conditions and strong performance in the services sector, according to the Reserve Bank of India’s (RBI) latest State of the Economy assessment published in its December bulletin.

The RBI noted that high-frequency indicators point to sustained economic momentum in the post-festival month.

While Goods and Services Tax (GST) collections appeared subdued due to rate rationalisation, other indicators such as e-way bill generation, petroleum consumption, and digital payments recorded improved growth, reflecting healthy underlying demand, particularly in urban areas.

Retail passenger vehicle sales grew at their fastest pace in over a year, aided by GST incentives, wedding season demand, and improved supply chains. Domestic air passenger traffic also registered its strongest growth since May 2025, highlighting buoyant urban consumption.

Despite positive prospects for the rabi season, supported by higher minimum support prices and lower GST rates, the RBI observed signs of moderation in rural demand.

Retail automobile sales in rural areas slowed sharply after the festive season, partly due to unfavourable base effects. Manufacturing activity also showed mild deceleration, even as services remained resilient.

Inflation and Monetary Policy Outlook

Headline retail inflation rose to 0.7 per cent in November from October’s historic low of 0.3 per cent, largely due to base effects.

However, inflation remained below the RBI’s lower tolerance level of 2 per cent for the third consecutive month. Core inflation stayed steady at 4.3 per cent and fell to a record low of 2.4 per cent when gold and silver prices were excluded.

This benign inflation outlook guided the Monetary Policy Committee’s decision to cut the repo rate by 25 basis points to 5.25 per cent, providing room to support growth.

The Indian rupee weakened against the US dollar in November due to global dollar strength and muted portfolio inflows, though volatility remained lower than most major currencies. In real effective terms, the rupee stayed broadly stable.

The RBI acknowledged emerging global headwinds, including risk-off sentiment in equity markets and negative portfolio flows to emerging economies. However, it emphasised that strong domestic demand and coordinated fiscal and monetary policies have helped build economic resilience.

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