Despite sweeping tax-rate reforms in September, which slashed rates on 99% of taxed items, India’s monthly goods and services tax (GST) collections continued to reflect strength and resilience. The government has expressed optimism that any shortfall in FY26’s revenue targets will be modest.

Rate Cuts and Revenue Stability

In early September 2025, the Goods and Services Tax framework underwent significant rationalisation—several tax slabs were abolished and only two major slabs (5% and 18%) remained.  Despite these tax-relief measures, gross collections for September rose approximately 9% year-on-year to around ₹1.89 lakh crore. The data suggest that the broad tax base and sustained consumption are offsetting revenue pressures from lower tax rates.

Optimism Over October and FY26 Outlook

Officials at the Ministry of Finance (MoF) are upbeat about the upcoming October figures and believe the full-year shortfall will be marginal. The strong GST trend amid the festive season lends confidence to the fiscal outlook. For sector participants and financial-advisory professionals, this implies that despite tax relief, structural fiscal strength remains intact—an important insight when discussing investment and budget implications with clients.

Implications for Investors and Financial Advisors

For wealth managers and mutual-fund distributors, the robust GST mop-up offers several meaningful cues.
First, the fact that collections stayed firm amid a large-scale tax-rate cut signals resilient consumer demand and healthy economic momentum. Second, sectors tied to consumption—retail, consumer durables, electronics, FMCG—may benefit in this environment of both price relief and sustained demand. On the flip side, it also means that assumptions of revenue drag from tax cuts may be over-pessimistic in portfolios that emphasise domestic demand themes.

Key Considerations Ahead

Though the current numbers are positive, a few caveats remain. The February 2026 budget shortfall remains a risk if rate cuts are larger or consumption weakens. Also, the translation of tax relief into sustained investment and capacity expansion will determine whether this collection strength is a one-off or a durable trend. Advisors should monitor monthly GST collection updates, state-wise trends, and the proportion of refunds issued versus new mop-up, as these finer points may signal pressure points in the future.

Source: The Economic Times

The Reserve Bank of India (RBI) is stepping up efforts to make the Indian Rupee (INR) a globally accepted trade and settlement currency, aligning with the government’s long-term ambition of making India a developed economy. Deputy Governor T. Rabi Sankar recently highlighted that exporters have already started invoicing in rupees, marking the beginning of a significant shift in India’s external trade dynamics.

A Strategic Shift Toward Financial Sovereignty

Rupee internationalisation is not just a currency move—it’s a strategic step toward reducing dependence on foreign currencies and enhancing financial sovereignty. The RBI believes that wider acceptance of the rupee in global trade will help mitigate exchange-rate risks and insulate India from volatility caused by global monetary shifts.

“When your currency is not commonly used or acceptable for global cross-border trades, that does not happen,” said Sankar, emphasizing the importance of currency visibility in international markets. By promoting rupee-based trade settlements, India aims to reduce the dominance of the U.S. dollar in its external transactions and build a more resilient macroeconomic framework.

Building the Foundation for a Global Role

The process of rupee internationalisation has already begun, though at an early stage. A few exporters have started billing and settling transactions in rupees, and the RBI expects this trend to gain momentum as the ecosystem matures. The shift will be gradual and will involve developing trade-settlement infrastructure, forging bilateral arrangements, and ensuring liquidity support for rupee-denominated transactions.

This move is part of a broader push by India to make its financial system more adaptable and aligned with global practices while still maintaining stability at home.

Why It Matters for Businesses and Investors

For corporates, this shift can bring substantial benefits. Exporters and importers will face lower currency-conversion costs and reduced forex risk, making trade more efficient. Domestic companies dealing with multiple foreign partners may also find invoicing in rupees simplifies operations and enhances predictability.

For investors and financial advisors, the implications are equally noteworthy:

• Rupee-denominated trade may improve profit margins for certain sectors over time.

• Reduced exposure to foreign-currency fluctuations could stabilize corporate earnings.

• The move aligns with India’s long-term macroeconomic stability and global integration goals.

Advisors should monitor how companies, particularly in manufacturing, commodities, and exports, adapt to this change — as early adopters may enjoy competitive advantages.

The Road Ahead: Opportunities and Challenges

While the intent is clear, the road to making the rupee an internationally recognised currency is long. India must first ensure consistent trade volumes in INR, establish cross-border clearing systems, and secure confidence from global partners. Building liquidity and trust in the rupee will require sustained policy coordination between the RBI, the government, and foreign trade partners.

Experts also caution that such transitions take years. But if executed well, the payoff could be immense — a stronger, more autonomous Indian economy, with the rupee gaining a status comparable to regional currencies like the Chinese yuan.

Source: The Economic Times

India’s domestic consumption is powering ahead, driven by rising incomes, urbanisation and changing lifestyles. But the real game-changer lies ahead: translating this demand momentum into a manufacturing renaissance. In other words — a consumption boom alone isn’t enough. India’s ability to build, produce and supply at scale will determine whether this demand becomes a sustained growth engine.

Consumption Growth – A Solid Foundation

India today enjoys a strong base of consumer demand. With a large middle class, favourable demographics and an increasing propensity to consume, the country is moving beyond mere survival consumption into discretionary spending, premium goods and services. This trend opens a wide frontier for manufacturing firms to cater to both domestic and global markets.

However, a manufacturing sector that remains relatively small in global terms risks becoming a bottleneck. If more of what Indian consumers buy has to be imported or assembled with low domestic value addition, the full growth dividend may not materialise.

Manufacturing’s Undervalued Role

Despite the consumption momentum, manufacturing’s share in India’s GDP remains modest compared with global peers. To fully capitalise on domestic demand, India needs to boost domestic production capacities, invest in supply-chains, elevate productivity and integrate deeper into global value chains. According to industry estimates, manufacturing’s contribution to gross value added (GVA) could rise significantly if the right policies and investments align.

Key enablers for this transition include:

• Accelerated investment in capital goods, advanced manufacturing and automation

• Strengthened logistics and infrastructure to connect factories to markets

• Enhancing skills and technology to upgrade productivity

• Policy consistency and scale-efficiency in manufacturing clusters

Investors & Advisors — What to Watch

For wealth managers, mutual fund distributors and financial advisers, the evolving synergy between consumption and manufacturing offers a powerful narrative:

• Opportunity Lens: Consumption-led sectors — consumer goods, electronics, automobiles, premium lifestyle products — are likely to benefit as manufacturing ramps up.

• Structural Allocation: Investors may consider increasing exposure to companies poised to benefit from increased value addition, localised supply chains and export capability.

• Risk Consideration: Although consumption is robust, if manufacturing fails to catch up, imports may dominate, margins may compress and growth may lose texture. Investing in firms or funds with strong domestic manufacturing linkage may offer an edge.

Strategic Outlook

The transition from consumption-growth to manufacturing-growth isn’t automatic. While domestic demand is clearly there, converting that into high-quality manufacturing output will require time, investment and disciplined execution.

On the one hand, policymakers must stay focused on enabling conditions: infrastructure, regulation, land/labour reform, and technology infusion. On the other hand, market-participants should remain alert to implementation risk: delays, capacity under-utilisation, global competition and cost escalation.

A balanced portfolio approach will factor in both upside from consumption-dominated growth and risk mitigation around manufacturing bottlenecks.

The US Federal Reserve has reduced its benchmark policy rate by 25 basis points, bringing the target range to 3.75%–4.00%. This marks the second rate cut of 2025, as the Fed attempts to cushion the economy against the twin pressures of a government shutdown and slowing growth momentum.

The decision underscores the central bank’s cautious approach — balancing persistent inflation concerns with emerging weakness in employment and output indicators.

Policy Rationale: Balancing Inflation and Growth Risks

The Federal Open Market Committee (FOMC) cited “elevated uncertainty” in its policy statement, noting that while inflation has moderated, it remains above target. Simultaneously, job creation has weakened, suggesting cooling labour demand.

Fed Chair Jerome Powell acknowledged that the ongoing government shutdown has disrupted economic data collection, making policy assessment challenging. He added that while the central bank is open to further easing if conditions worsen, another rate cut is not guaranteed.

This marks a notable shift in tone from previous meetings, suggesting the Fed intends to move cautiously as it gauges the real impact of fiscal disruptions and global volatility.

Global Market Reaction

The rate cut triggered a mixed response across global markets. US equities saw modest gains as investors welcomed the policy support, while bond yields fell on expectations of a longer easing cycle.

In the foreign exchange markets, the US dollar weakened slightly, providing relief to emerging-market currencies. However, analysts warned that the dollar’s medium-term trajectory would depend on the duration of the US government shutdown and the pace of economic recovery.

Implications for Indian Investors and Markets

For Indian investors, the Fed’s latest move carries several implications:

• Capital Flows: Softer US interest rates could encourage foreign inflows into emerging markets, potentially benefiting Indian equities and debt markets.

• Currency Impact: A weaker dollar may help stabilise the rupee, though volatility cannot be ruled out amid shifting global risk sentiment.

• Bond Market Dynamics: Lower US yields may improve appetite for Indian debt, influencing domestic bond yields and fixed-income fund performance.

• Portfolio Strategy: Wealth managers may consider reviewing international exposure, maintaining diversification, and focusing on quality assets as markets adjust to a more dovish Fed stance.

The Road Ahead

The Fed’s policy trajectory will hinge on three major factors in the coming months:

1. Labour-Market Trends: Employment data, once available post-shutdown, will offer a clearer view of economic momentum.

2. Inflation Stability: Sustained moderation in inflation could open the door for another cut in early 2026.

3. Fiscal Developments: The duration and impact of the government shutdown will determine short-term growth dynamics.

Economists widely expect the Fed to maintain a data-dependent stance, avoiding aggressive rate cuts unless the slowdown deepens.

Source: the Economic Times

India’s banking system has recently moved into a liquidity deficit, marking a notable shift from the earlier surplus environment. The strain is being felt across the financial system as cash availability tightens and overnight rates inch upward. The change comes amid foreign exchange market interventions by the Reserve Bank of India (RBI) and seasonal currency demand due to the festive period.

This liquidity tightening is being closely watched by market participants, as it could influence interest rates, currency stability, and short-term funding costs across the economy.

Drivers Behind the Liquidity Squeeze

The current liquidity shortfall can be traced to multiple factors:

• RBI’s forex operations: The central bank has been selling dollars to manage rupee volatility, which drains rupee liquidity from the system.

• Government cash balances: Tax collections and bond auctions have temporarily absorbed liquidity from the market.

• Seasonal demand: The festival season typically leads to higher cash withdrawals, further tightening system liquidity.

While such fluctuations are not uncommon, the combined impact of these factors has turned liquidity negative faster than expected.

Impact on the Rupee and Broader Markets

The rupee’s recent weakness is partly linked to the liquidity deficit. As banks face tighter funding conditions, short-term rates rise, and the RBI’s room to conduct forex interventions narrows. Analysts note that if the liquidity deficit persists, the rupee may face further depreciation pressure — especially if global risk sentiment turns volatile.

For investors and financial advisors, this liquidity scenario carries important implications:

1. Currency Risk: A weaker rupee could impact import-reliant sectors and foreign investors’ returns.

2. Debt Market Impact: Higher short-term borrowing costs may put pressure on corporates with significant leverage.

3. Equity Valuations: Rising funding costs and currency volatility can weigh on market sentiment.

Policy Response and Market Outlook

Economists believe that the RBI may soon inject liquidity to stabilise short-term rates and ease system pressure. This could be done through:

• Open Market Operations (OMOs) – buying government securities to release liquidity.

• Temporary repo operations – to provide short-term funding to banks.

• Adjustment in cash-reserve ratio (CRR) – if liquidity remains tight for an extended period.

However, the timing and scale of such interventions will depend on inflation trends, credit growth, and external capital flows.

Strategic Implications for Investors and Advisors

For wealth managers and mutual fund distributors, the liquidity shift is an important portfolio consideration. It affects both interest-rate expectations and currency-exposed investments.

Advisors should:

• Reassess exposure to interest-rate sensitive sectors such as NBFCs, infrastructure, and housing finance.

• Review clients’ foreign-currency exposure and hedge where necessary.

• Consider diversifying into domestic-demand-driven themes that are less affected by global or currency fluctuations.

  Source: MoneyControl

The Finance Ministry has initiated early consultations for the Union Budget 2026–27, inviting inputs from industries and trade associations on proposed tax and duty changes. This proactive approach aims to create a more efficient and transparent tax framework that supports India’s long-term growth priorities.

Early Start to Pre-Budget Consultations

According to the Ministry’s Tax Research Unit, trade bodies and sectoral associations have been asked to submit their recommendations by November 10, 2025. The request covers both direct and indirect taxes, with the government encouraging data-backed submissions. Stakeholders have been advised to include sector-specific details such as production data, value addition, and pricing structures to help policymakers make informed decisions.

The government’s focus remains on tax rationalisation, simplifying compliance processes, and addressing structural issues like inverted duty frameworks. The idea is to ensure tax policies are fair, consistent, and conducive to industrial competitiveness.

Focus on Simplifying Direct and Indirect Taxes

For direct taxes, the Finance Ministry is moving toward phasing out exemptions and deductions while maintaining competitive tax rates. The aim is to streamline the system, broaden the tax base, and improve predictability for businesses.

On the indirect tax side, officials are evaluating duty realignments to correct imbalances across sectors—especially where certain imported inputs are taxed more heavily than finished products. Such changes could help domestic manufacturers and exporters maintain pricing parity and improve market access.

What This Means for Businesses and Investors

The consultation process is more than a routine pre-budget exercise—it provides industries a platform to influence India’s fiscal and tax roadmap. Businesses are expected to present well-documented suggestions that could impact not just policy formulation but also capital allocation, pricing strategies, and competitiveness.

For investors and financial professionals, potential tax revisions could reshape sector valuations and post-tax returns. Rationalised duty structures may benefit manufacturing, logistics, and infrastructure sectors, while policy simplifications could improve ease of doing business.

Balancing Fiscal Prudence and Growth

While the government is open to industry input, officials have clarified that final budgetary decisions will depend on fiscal space, revenue targets, and macroeconomic stability. Not every proposal will make it to the final Budget, but the consultation marks an important step toward a more collaborative and evidence-driven policy design.

By aligning tax policies with growth objectives, the Finance Ministry aims to sustain momentum in investment and employment generation while maintaining fiscal discipline.

Outlook for Advisors and Policy Watchers

For financial advisors and wealth managers, tracking these developments is crucial. Any reform in tax treatment—whether on capital gains, GST, or corporate tax—could directly influence investment strategy and portfolio construction.

Advisors should help clients stay informed about potential changes, preparing for adjustments in tax-efficient investment planning once the Budget is presented.

Source: The Economic Times

The Reserve Bank of India (RBI) has made it clear that the exchange rate will not be used as a policy instrument to counter trade tariffs or other external pressures. Deputy Governor Poonam Gupta, speaking at an event in Mumbai, emphasised that the rupee’s value is determined by market forces and not actively managed to offset tariff shocks.

She explained that while the rupee has depreciated around 3 per cent so far this year, the central bank’s focus remains on ensuring orderly movement rather than defending or targeting any specific level. Gupta reiterated that India’s monetary policy is designed to maintain macroeconomic stability and credibility rather than serve as a response mechanism to trade disputes.

Maintaining Market Integrity Amid Global Pressures

The clarification comes at a time when rising global tariffs—particularly from the United States—have raised questions about how emerging markets like India might protect export competitiveness. Some analysts had speculated that the RBI could use currency depreciation as a buffer.

However, the deputy governor’s comments signal a firm stance: India will not engage in currency manipulation. Instead, the RBI intends to allow market fundamentals—such as capital flows, interest rate differentials, and trade balances—to drive the rupee’s movement. This approach aligns with India’s long-term goal of maintaining transparency and trust in its macroeconomic framework.

Implications for Investors and Market Participants

For investors and wealth managers, this policy stance carries several implications. The rupee’s trajectory will now be guided more by external flows and liquidity conditions than by deliberate intervention. This increases the importance of currency-risk management for portfolios exposed to import costs, foreign earnings, or overseas investments.

Moreover, investors should not assume that a weaker rupee will be used as a policy lever to cushion exporters. Portfolio strategies based on that assumption may need recalibration. Instead, market participants are encouraged to focus on structural factors—like trade data, fiscal policy, and capital inflows—that truly influence currency stability.

Broader Economic Context

The RBI’s position also reflects India’s growing confidence in managing external pressures through strong fundamentals. The country continues to maintain healthy forex reserves and a manageable current account deficit, providing resilience amid global headwinds.

At the same time, the statement underscores a disciplined approach to monetary management. Rather than react to every global tariff or geopolitical shock, the RBI aims to preserve policy credibility and keep inflation and financial stability at the core of its strategy.

Outlook for the Rupee and Policy Continuity

Going forward, the rupee is likely to trade within a controlled band influenced by foreign capital flows and global risk sentiment. As long as the RBI maintains its current approach, volatility may remain contained despite external challenges.

Market participants can expect the central bank to continue intervening only to smooth extreme fluctuations—not to engineer competitiveness through devaluation. For investors, this signals continuity in India’s macro-policy approach and reinforces confidence in the rupee’s long-term stability.

Source: The Economic Times

India’s economy continues to show remarkable resilience amid global challenges. Chief Economic Advisor V. Anantha Nageswaran has projected that the country’s GDP growth could approach 7% in FY26, supported by robust domestic demand, policy reforms, and fiscal discipline. Despite a complex international environment marked by trade tensions and protectionist measures, India’s growth story remains intact.

Resilience Amid Global Headwinds

The global economy has been grappling with persistent inflation, slowing trade flows, and tighter financial conditions. Yet, India has managed to maintain strong momentum thanks to its diverse economic base and proactive government measures.

• Structural reforms and targeted fiscal interventions have enhanced economic stability.

• Domestic consumption and investment continue to be major growth drivers.

• The country’s external sector remains buffered by healthy foreign exchange reserves and steady capital inflows.

According to Nageswaran, India’s policy framework—focusing on tax rationalisation, public infrastructure spending, and ease of doing business—has helped mitigate global shocks effectively.

Fiscal and Credit Dynamics

The Chief Economic Advisor also addressed concerns over private credit growth. While some analysts have flagged slower lending activity, Nageswaran noted that the overall resource mobilisation in the economy remains strong. Funding through non-bank lenders, corporate bonds, and equity markets continues to support investment expansion.

This broader financial ecosystem, he said, provides resilience against credit-cycle fluctuations and ensures that capital formation remains healthy.

Outlook for Investors and Market Participants

For investors and financial advisors, the near-7% growth projection reinforces India’s position as one of the world’s fastest-growing major economies. A stable macroeconomic environment, combined with sustained reforms, presents long-term opportunities across:

• Domestic consumption and retail sectors

• Manufacturing and infrastructure development

• Financial and digital services

However, investors are also advised to maintain a balanced approach, considering potential external shocks such as oil price volatility, currency fluctuations, and geopolitical developments.

Policy Continuity and Long-Term Focus

Looking ahead, India’s ability to sustain this growth momentum will depend on how effectively ongoing reforms are implemented. Continued fiscal prudence, improvement in the investment climate, and policy stability will be critical to achieving long-term targets.

Economists also suggest that while short-term data may fluctuate, India’s structural growth trajectory remains strong, driven by its expanding middle class, rapid digitalisation, and resilient financial system.

Source: The Economic Times

Business sentiment in India softened in the July-September quarter (Q2 FY26), ending a streak of improvement that lasted three consecutive quarters. The Business Confidence Index (BCI) dropped to 142.6 from 149.4 in the preceding quarter.

Despite remaining above the year-ago level of 134.3, the moderation reflects a shift in momentum. Firms cited a range of global headwinds — including additional tariffs from the United States — as well as domestic policy adjustments, such as recent GST rate rationalisations, that have weighed on their outlook.

Slowing Confidence & Mixed Outlook

The survey revealed that three of the four components underpinning the BCI  expectations of improved economic conditions, financial position, and investment climate  all eased in Q2. However, capacity utilisation remained high, with 98 % of firms reporting operations “at or above optimal levels.”

Large firms were noticeably more cautious than smaller ones: while the BCI for large companies fell to 149.9 from 171.6, sentiment among MSMEs increased slightly to 138 from 137 in the preceding quarter.

While output expectations remained positive 82% of firms expected production to rise vs 79% in Q1, and 73% expected exports to increase vs 67% in Q1 – a significant share of respondents anticipated only modest growth (44% expected output growth of 0-5%).

Implications for Investors and Advisors

For wealth-managers, mutual-fund distributors and financial advisors, the dip in business confidence warrants attention in several areas:

• The easing of sentiment suggests that while underlying capacity remains strong, growth expectations are becoming more cautious. Clients should avoid over-reliance on high-growth assumptions without acknowledging possible cyclicality.

• From a portfolio strategy perspective, sectors tied to global trade and export-intensive businesses might face greater uncertainty given the external pressures flagged by the survey.

• Advisors may consider increasing emphasis on domestic‐demand themes and businesses less vulnerable to global shocks. At the same time, maintaining diversification and risk-monitoring is crucial given the moderation in confidence.

Strategic Outlook

Although the drop in the BCI signals a slower growth trajectory, it does not indicate contraction sentiment remains above long-term averages. This suggests that India’s business environment remains robust but is becoming more introspective in its optimism.

Going forward, key variables to monitor include:

• How external trade policies and global tariff pressures evolve, especially since these were directly cited as dampeners.

• Whether domestic policy adjustments (such as tax or regulatory reforms) create transitional uncertainty affecting business investment plans.

• How sentiment translates into actual investment, hiring and production decisions. High capacity utilisation suggests latent potential, but without follow-through investment, growth may stall.

  Source: MoneyControl

India’s tax system is facing a growing bottleneck, with over ₹18 lakh crore stuck in unresolved appeals before the Commissioner of Income Tax (Appeals), according to a recent report by the Federation of Indian Chambers of Commerce & Industry (FICCI). The chamber has urged the Finance Ministry to take swift corrective measures ahead of the upcoming budget.

Mounting Backlog Poses a Risk to Ease of Doing Business

As of April 1, 2025, nearly 5.4 lakh cases remain pending at the CIT(A) level, making it one of the most pressing administrative challenges in India’s direct tax framework. The FICCI report notes that while the faceless appeal system introduced to improve transparency and reduce physical interface was a step in the right direction, it has not yet delivered on its promise due to operational and procedural bottlenecks.

Additionally, the vacancies across appellate offices are further adding to the delay, with many posts at the Commissioner (Appeals) level lying unfilled for months.

FICCI’s Recommendations for Reform

To address these systemic challenges, FICCI has outlined several key measures that could improve tax-dispute resolution efficiency:

• Fill vacant posts at appellate offices to speed up case disposal.

• Introduce differentiated tracks for low-value and high-value disputes to improve case management.

• Set strict timelines for appeals to prevent accumulation of pending cases.

• Simplify compliance frameworks, especially around TDS and digital submissions.

The chamber believes that implementing these reforms can significantly enhance taxpayer confidence and promote a smoother business environment.

Complex TDS Structure Adding to Compliance Burden

Another major pain point identified by FICCI is the complexity of the TDS (Tax Deducted at Source) regime, which currently involves over 37 distinct provisions with rates ranging from 0.1 % to 30 %.

This patchwork of rates and categories has led to:

• Frequent classification disputes between taxpayers and authorities,

• Cash-flow disruptions for businesses, and

• A rise in litigation due to inconsistent interpretations of tax obligations.

FICCI has therefore recommended simplifying the TDS framework by consolidating multiple provisions and reducing rate variability.

Industry Seeks Clarity on Corporate Restructuring

The report also highlights the lack of tax neutrality in fast-track demergers under the Companies Act 2013. Traditional demergers qualify for tax-neutral treatment, but fast-track ones do not — discouraging companies from using faster reorganisation routes.

Broader Implications for Investors and Businesses

The massive backlog of pending cases represents not just an administrative issue but also a financial and strategic concern for businesses and investors. Funds locked in disputes reduce liquidity, increase compliance risk, and affect company valuations.

For wealth managers and financial advisors, understanding the scale of this litigation is essential, as it can influence sectoral investment exposure and client portfolio risk assessments.

Key implications include:

• Slower resolution may affect cash flows for listed entities.

• Investors may need to track companies with large contingent tax liabilities.

• Potential reforms could create new opportunities in tax-compliant corporate governance sectors.

The Road Ahead: Restoring Trust Through Reform

While the government has taken steps to improve tax administration, FICCI emphasizes that the next phase of reforms must focus on speed, accountability, and simplicity. Filling key vacancies, modernizing digital infrastructure for faceless appeals, and ensuring clarity in tax provisions could restore business confidence and reduce litigation.

Experts believe that a transparent and time-bound appeal process will not only free up billions in locked capital but also improve India’s global standing in ease of doing business.

Source: MoneyControl