High-frequency data indicates that although the rise of digital payments has somewhat slowed in September, manufacturing PMI, GST collections, and vehicle sales trends are all positive.
According to high-frequency data published on October 1, India’s economy continued to grow well throughout the second quarter of FY26, despite several signs showing deceleration in September.
Manufacturing is simple yet robust
In September, the HSBC India Manufacturing PMI dropped to 57.7, a four-month low, from 59.3 in August. Nevertheless, the 58.7 quarterly average was one of the highest since the survey’s inception.
Although it weakened, the September headline index was still much higher than the long-term average. According to Pranjul Bhandari, chief India economist at HSBC, “new export orders grew quicker in September, suggesting demand outside of the US would be offsetting any decrease from tariffs.”
Production declines to a four-month low
Despite a slower growth in new orders, company confidence has risen due to the GST reduction, reaching a seven-month high in September 2025.
The Tax Buoyancy and GST
A good sign was the GST income collections, which increased 9.1% year over year to Rs 1.89 lakh crore in September—the quickest growth rate in four months. Q2FY26 gross inflows were Rs 5.71 lakh crore, up 7.7 percent from the same period last year, although this rise was less rapid than the 11.7 percent expansion in the first quarter.
September GST revenues remain robust
Digital Payments Are not as Popular
Even while UPI volumes increased 33% year-over-year in Q2FY26 while values increased 20.9 percent, there have been indications of a slowdown in digital transaction growth. FASTag volumes also eased, expanding at a slower rate of 4.6 percent in September compared to 12.8 percent in August, while UPI transactions decreased to 19.6 billion from 20.01 billion in August.
Tractors and Automobiles Improve Attitude
With PV manufacturer Tata Motors reporting a 10% increase in domestic dispatches in Q2FY26, September sales rising by over 40%, and EV shipments doubling, the car industry ended the quarter on a high note. September passenger vehicle sales at leading SUV manufacturer Mahindra & Mahindra increased by 10%, while light commercial vehicle sales increased by 21% and three-wheeler sales increased by 30%. Sales for Ashok Leyland increased by 7%. Manufacturers of two-wheelers also made progress; Bajaj Auto reported a 5% increase in September sales.
Tractor sales increased by more than 40% across all firms in the rural sector, with Escorts Kubota recording its highest-ever monthly sales in September, a 50% increase. The September report indicates a little slowdown, but overall domestic demand is still strong.
On October 1, the Reserve Bank of India increased its growth prediction for India from 6.5 percent to 6.8 percent. Following a 7.8 percent rise in the previous quarter, the central bank anticipates that the economy will expand by an additional 7 percent in Q2FY26.
“Domestic economic activity continues to retain pace in Q2:2025-26 as evidenced by high frequency indicators available so far,” RBI governor Sanjay Malhotra said in his statement, adding that the rationalization of the GST is anticipated to enhance demand.