New Delhi: India's consumption surged in October, buoyed by the festive season and recent rationalization in goods and services tax rates, showing economic resilience even as global growth remains uncertain, SBI Capital Markets said in its latest EcoCapsule report released on Monday. The pickup, it noted, reflects a decisive turnaround in demand after a sluggish monsoon quarter, with households and businesses alike stepping up spending.

The investment banking arm of the State Bank of India drew its optimism from a string of upbeat indicators: a 41% year-on-year jump in vehicle sales, record digital payments, and the strongest festive spending in years. Unified Payments Interface (UPI) transactions hit an all-time high of 2.7 billion, while Diwali sales climbed 25% to over ₹6 trillion, underscoring how domestic demand continues to drive India's growth even as exports and global trade remain weak.

"With PMI (purchasing managers' index) indicators maintaining their sanguinity and continued spending push from the government in terms of capex and revex, the softness seen due to heavy monsoons in Q2 seems to have made way for a sunny Q3," the report said.

"We continue to expect nominal GDP growth at about 8.5% y/y (for July-September FY26), with real GDP supported by a low deflator and consumption pickup," it added.

India's economy grew at a brisk pace in the first quarter of FY26, with real GDP expanding around 7.8% and nominal GDP rising close to 8.8%, supported by resilient domestic demand and improved consumption following GST rate cuts.

Offsetting weak exports

The pickup in India's consumer spending offset some of the hit from weak exports and global headwinds.

While tariff tensions and policy uncertainty abroad continue to cloud the global outlook, India's strong domestic demand, bolstered by GST rate cuts and festive spending, is expected to sustain robust consumption momentum in the coming quarters.

"Manufacturing PMI expanded sharply to 59.2 in Oct'25, with a faster increase in new orders underpinning buoyant demand due to GST relief and productivity gains," it said. "Strong demand led to producers raising output prices at a 12-year high pace, while slowing input price inflation means expansion of margins."

The report also pointed out that a new trade agreement between Washington and Beijing, cutting tariffs on Chinese goods below 50% and easing the flow of rare earths, has offered some respite to Indian businesses.

The country's bank credit is also reviving on the back of retail lending, even as the economy awaits a broad-based corporate capex cycle, with the credit-deposit ratio crossing 80% once again, the report said. "We expect that fresh term deposit rates have bottomed out in the near term, and this is coinciding with renewed drivers of credit growth," the report said.

Sustainable pickup expected

"With the outlook for the rate trajectory remaining benign and hope of private large corporate capex still alive, we expect a sustainable pickup in credit growth in the medium term, with bank credit growth clocking 1.3-1.5x of nominal GDP growth in FY26," it added.

On the external front, SBI Caps pointed out that the rupee's slide against the dollar to record lows prompted the Reserve Bank of India (RBI) to intervene aggressively in the currency markets. To be sure, the central bank sold $7.7 billion in August to stabilize the exchange rate.

Foreign portfolio inflows inot India recovered in October, providing some respite, though the impact of volatile "hot money" flows will remain a key monitorable, the report said.

"Moreover, trade deficit remains prey to change in India's crude basket and expected bump up in gold imports during the festive period. The silver lining is that despite these challenges, CAD (current account deficit), at about 1% of nominal GDP in FY26, is expected to be well within historical levels," it said.

"Along with a $700 bn forex reserve, it presents a fortress to guard against global swings," the report added.