Excess Rains, Tariff Impact, Adverse Base Hit India's Oct Growth: ICRA

India’s economic growth momentum softened in October 2025 as a combination of excessive rainfall, tariff-related uncertainties from the US, penalties, and an unfavourable base effect weighed heavily on industrial and market performance. According to a recent assessment from ICRA Ratings, the nation’s core sector output remained flat year-on-year, marking a sharp moderation after a 3.3% expansion in September.

ICRA reported that its business activity monitor fell to a 14-month low, recording 5.9% YoY growth in October, down from 8.3% in September, indicating weakening economic sentiment across sectors.

Industrial Production Growth Weakens

The Industrial Production Index (IIP) is expected to register a modest 2.5–3.5% growth for October, compared to 4% in September 2025. While certain manufacturing segments maintained momentum, uncertainties around tariffs and dampened consumer sentiment limited broader industry expansion.

Post-festive demand may offer mild relief. According to ICRA, restocking activities could support growth in durable goods, whereas big-ticket consumer categories may face continued discounting pressure to clear inventory.

GDP Outlook: Moderately Strong but Slowing

Despite the recent slowdown, India’s growth trajectory remains comparatively strong. ICRA estimates GDP growth at 7% in Q2 FY26, less than the 7.8% achieved in Q1, and expects further easing in the second half of the fiscal year unless major investments rise.

The rating agency currently predicts India’s GDP to grow at 6.8% in FY26, reflecting resilience but also caution amid weakening global trade conditions.

Financial Indicators and Liquidity Conditions

Out of 12 tracked financial indicators, five showed easing in October compared to September. However, money market indicators remained under pressure, although conditions started stabilizing in early November.

What’s Next for India’s Growth?

India’s near-term economic future depends on:

Key Factors to Watch

• Government capital expenditure allocation increases

• Resolution of tariff-related uncertainties

• Global trade normalization

• Revival in consumer spending sentiment

• Stability in weather-dependent sectors

If these elements align positively, ICRA sees potential for growth recovery in coming quarters.

Conclusion

India’s growth performance in October mirrored a confluence of temporary but impactful pressures—from excess rains and tariff risks to weak base effects and cautious consumer behavior. While industrial output and business activity slowed significantly, the long-term outlook remains stable, supported by domestic demand and government spending capability. With GDP projected to grow at 6.8% in FY26, strategic policy execution and global market stabilization will be crucial for sustained recovery.