RBI Sep-25 Forward Survey shows an optimistic undertone

17 Oct 2025 , 10:52 AM

The latest RBI forward looking survey for September 2025, published in October 2025, carries a strong message. It is a message of a general feeling of optimism about better growth and lower inflation expectations.

• URBAN AND RURAL CONSUMER CONFIDENCE SURVEYS SHOW OPTIMISM

The urban consumer confidence index for the current period and the expectations for the year ahead period improved significantly. Two factors contributing have been the lower inflation experienced, and the better growth picture painted by the RBI monetary policy. The good news is that urban households are not only expecting to gain from lower prices (post-GST cuts), but also from improved income and savings levels.

The rural consumer confidence survey has also painted an optimistic picture of inflation and growth. There has been a marginal increase in current inflation expectations, but that is more due to the festive season. On growth, incomes, and spending power; rural households continue to be optimistic. Clearly, the positive Kharif output this year and better farm infrastructure sponsored by the government have helped matters.

• HOUSEHOLD INFLATION EXPECTATIONS TRENDING LOWER

The inflation survey of households looks at current inflation with respect to 3-months ahead, and the 1-year ahead expectations. Here is what we could decipher.

• Compared to the July survey, the September survey shows household perception of current inflation up 20 bps from 7.2% to 7.4%, due to festive season. However, expectations of 3-month ahead inflation is down 20 bps from 8.3% to 8.1% while the expectations of 1-year ahead inflation is down 30 bps from 9.0% to 8.7%.
• Expectations of inflation across food products and non-food items moderated in the inflation basket. This applies to the three-month ahead expectations, as well as to the one-year ahead expectations of inflation.

The lower inflation expectations have to be seen in conjunction with the consumer confidence survey, as growth and income expectations have also improved.

• Q1FY26 MANUFACTURING SURVEY SEES SEASONAL IMPACT

According to the OBICUS Manufacturing Survey for Q4FY25, the capacity utilization has come down from 77.7% to 74.1%. In Q1FY26, most manufacturers reported lower growth in new orders on a sequential basis, while it was flat on a yoy basis. Ratio of raw material to sales increased in the quarter, largely on account of seasonal factors. Hence this quarter may not be exactly comparable with previous quarters.

While there has been a rise in the ratio of inventories to sales, this could be more due to stockpiling of inventories ahead of festive season. This ratio should normalize once the festival season is over. First quarter is also seasonally a slow quarter, when most of the maintenance shutdowns happen, which has led to a rise in order backlog ratio. For Q2FY26, manufacturers have hinted at moderation in demand, and cost pressures.

• WHAT THE PROFESSIONAL FORECASTERS SAID IN SEPTEMBER 2025

RBI also surveys professional forecasters on GDP growth, inflation, and current account.

• Professional forecasters have upped the FY26 GDP growth by 30 bps to 6.7% but lowered the projected growth for FY27 by 20 bps to 6.5%. For FY26, agricultural output is expected to be subdued at 3.9%. However, while industry growth will be marginally higher at 5.6%, the big thrust in FY26 is likely to come from Services growing at 7.8%.
• As per the professional forecasts, CPI inflation is pegged 50 bps lower than July survey at 2.6% for FY26 and 30 bps lower than July Survey at 4.1% for FY27. While food and fuel are likely to continue to exert downward pressure on the CPI basket, the residual core inflation is expected to be elevated at 4.2% in FY26 and 4.0% in FY27.
• On the external trade front, merchandise exports are expected to contract -1.0% in FY26 and stay flat in FY27. The export hit is due to the US tariffs. Merchandise imports are targeted to grow at 2.5% in FY26 and 6.0% in FY27. The current account deficit (CAD) is pegged at 0.9% of GDP in FY26, and at a similar level in FY27.

Overall, the survey expectations show a tinge of optimism, there are concerns that the combination of tariffs and visa restrictions could result in external vulnerability!