Robust GDP Growth Projections: India’s real GDP growth moderated to 6.5 percent in Q2 of FY2024-25 from 6.7 percent in Q1. While oEicial RBI data is awaited, the RBI forecasts GDP growth at 6.7 percent in Q2 and an acceleration to 7.6 percent in Q3 FY2024-25, indicating continued economic momentum supported by domestic demand and favorable agricultural performance.
Inflation Dynamics Reflect Volatility: Inflation trends in Q2 FY2024- 25 showed a mixed pattern, with headline inflation moderating to 3.6 percent in July but surging to 5.5 percent in September due to rising food prices and weather-related disruptions. Core inflation, excluding food and fuel, increased to3.6 percentin September, signaling underlying price pressures.
Monetary Policy Maintains Neutral Stance: In October, the RBI kept the repo rate unchanged at 6.5 percent and adopted a ‘neutral’ stance. This approach aims to align inflation with growth targets while addressing near-term inflationary pressures from food price volatility and global commodity fluctuations, emphasizing the importance of flexible policy measures in maintaining economic stability.
Resilient Manufacturing and Services Sectors: Both sectors maintained PMI readings above the critical50-point threshold, signaling continued expansion at 56.5and 57.7 respectively in September reflecting sustained growth despite a gradual slowdown in July and August, still indicating robust expansion driven by strong domestic demand, though facing challenges from rising input costs and increased competition.
Improved Fiscal Position Supports Growth:India’s fiscal deficit improved to 29.4 percent of the budget estimate in the first half of FY2024-25, down from 39.3 percent in the same period last year. This improvement was driven by robust tax revenues, including strong income tax and GST collections, and disciplined expenditure management. The stable fiscal position supports continued investment in growth and welfare priorities, ensuring fiscal prudence alongside economic expansion.
In Focus – Bond Markets:India’s bond market achieved record corporate bond mobilization of approximately USD 1.20 trillion in FY2023-24, a17 percentincrease over the previous year. Foreign investments in debt markets exceeded USD 12 billion in 2024, highlighting strong investor confidence and the bond market’s crucial role in funding economic growth.