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Reuters
02-06-2025
- Business
- Reuters
Rural consumption to drive India's GDP growth this fiscal year, economists say
MUMBAI, June 2 (Reuters) - Rural consumption is poised to remain a bright spot in the Indian economy, supporting growth in the ongoing fiscal year, economists said after fourth-quarter GDP growth beat estimates. India's economic growth rose to a one-year high of 7.4% in the January-to-March quarter, higher than forecast, data showed on Friday. Personal consumption grew 6% during the three months after an 8.1% rise in the previous quarter. For the fiscal year ending March, inflation-adjusted consumption growth of 7.1% outpaced broader economic expansion of 6.5%, reflecting a rural consumption recovery, Citibank said in a note on Friday. "High frequency data indicates rural demand is faring better even as urban demand is patchy," said A. Prasanna, head of research at ICICI Securities Primary Dealership. "Given rural consumption is a bigger part of overall consumption pie compared to urban consumption and was generally hurting from Covid shock in last few years, it is likely consumption growth will stay resilient." Above-average monsoon rains this year and the resultant rise in farm incomes are likely to boost rural demand as will easing inflation, economists said. Tractor and two-wheeler sales, the bellwether of demand in rural India, have been rising in recent quarters while sales of fast-moving consumer goods have been robust. Rural wage growth, adjusted for inflation, is at its highest in four years, data from ICICI Securities Primary Dealership showed, with demand for jobs under a rural jobs scheme has fallen in recent months, as per a recent JP Morgan report. Over the last two fiscal years, consumption growth in India has risen while investment growth has eased, and the trend may continue, Dhiraj Nim, an economist at ANZ, told Trading India on Monday. "For consumption, to be honest, rural demand can be a source of hope... I think consumption growth can beat GDP growth, but not by a large gap." India's central bank sees economic growth at 6.5% this fiscal year. Even as the rural economy hums along, global uncertainties could hold back wider momentum at a time when trade wars and geopolitical tensions threaten global growth and financial flows. "While India is a domestically-oriented economy, it will not be entirely insulated from a global growth slowdown," said Aastha Gudwani, chief India economist at Barclays. "Given the Indian economy's domestic orientation, where private consumption accounts for more than 55% of GDP, domestic demand is indeed the key driver," she said. India's corporate capex is likely to remain tentative amid heightened uncertainty created by U.S. tariffs and the uncertainty on urban consumption outlook, Gaura Sen Gupta, chief economist at IDFC First Bank, said. Good monsoon rains, along with a pickup in government spending and rate cuts by the central bank could offset some of this hit to growth, economists said.
Time of India
01-06-2025
- Business
- Time of India
RBI set to cut rates 3rd time in row
Mumbai: RBI is expected to cut the its benchmark rate by 25 basis points for the third successive time and continue with its supportive liquidity stance when the monetary policy committee concludes its three-day meeting on June 6. Economists say slowing growth and contained inflation leave room for further easing in monetary policy. India's GDP growth slowed to 6.5% in FY25 from 9.2% the previous year, though the March quarter saw a better-than-expected print of 7.4%. Inflation, meanwhile, remains within the RBI's 4% target. In April, RBI reduced its repo rate - the rate at which it lends to banks - by 25bps (100bps = 1 percentage point) to 6%. "We do believe that given the rather benign inflation conditions and the liquidity situation which has been made very comfortable through various measures of RBI, the MPC would go in for a 25bps cut in the repo rate on June 6," said Madan Sabnavis, chief economist, Bank of Baroda. He added that the central bank is also expected to revise its forecasts for growth and inflation and offer an assessment of global risks, particularly the impact of the upcoming expiry of the US tariff reprieve in July. A Prasanna of ICICI Securities also expects a 25bps cut, saying the robust Jan-March GDP growth confirms the case for moderate easing. "A preference for cuts in 25bps clips and accommodative stance means the MPC is well positioned to react to any data surprises on either side," he said. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Trading CFD dengan Teknologi dan Kecepatan Lebih Baik IC Markets Pelajari Undo He noted that RBI has already eased financial conditions by ensuring abundant liquidity. RBI has done this by pumping in rupee liquidity and by avoiding the usual borrowing that it does from money market to absorb surplus funds from banks. Barclays economist Aastha Gudwani noted that Q1 growth beat expectations, with GDP (gross domestic product) and GVA (gross value added) driven by a pickup in manufacturing and robust capital expenditure, even as consumption remained weak. "Full-year growth has come in at 6.5%," she said. Crisil expects RBI to cut rates by another 50bps this fiscal, citing favourable macroeconomic tailwinds such as expectations of an above-normal monsoon and subdued global crude prices. The IMD forecast of 106% of the long period average for the monsoon is likely to support kharif output, boost rural demand, and keep food inflation in check. Crude prices are forecast to average $65-70 per barrel this fiscal, lower than last year's $78.8. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Time of India
21-05-2025
- Business
- Time of India
RBI to slow cash boost after $100 billion injection; surplus transfer eyed, say economists
The Reserve Bank of India is expected to slow its liquidity infusion after pumping Rs 8.57 lakh crore ($100.06 billion) into the banking system since December, with a large surplus transfer to the government expected soon, several economists said. The central bank concluded its final scheduled open market bond purchase on Monday, and has not yet announced any more purchases. The RBI has been infusing liquidity since the last six months. " Dividend payment to the government and subsequent government expenditure will release adequate funds into the system and there should be no need to infuse liquidity through OMOs ( open market operations )," said Sandeep Bagla, CEO at Trust Mutual Fund. Play Video Pause Skip Backward Skip Forward Unmute Current Time 0:00 / Duration 0:00 Loaded : 0% 0:00 Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 1x Playback Rate Chapters Chapters Descriptions descriptions off , selected Captions captions settings , opens captions settings dialog captions off , selected Audio Track default , selected Picture-in-Picture Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Text Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Transparent Caption Area Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Drop shadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like 21st Century Skills Start with Confident Communication Planet Spark Learn More Undo Estimates for the upcoming surplus transfer range from Rs 2.5 lakh crore to Rs 3 lakh crore as per seven economists, though those at Citi expect a larger payout of between 3.5 trillion rupees and Rs 4 lakh crore. The RBI has of late slashed its cash reserve ratio, followed by secondary market debt purchases, foreign exchange swaps and aggressive open market operations. It is expected to announce its surplus transfer to the government before the end of this month. Live Events "With the dividend payment, the core liquidity may cross Rs 5 lakh crore, which is a very high number. For the next three months RBI need not inject durable liquidity, they can look at OMOs may be from September onwards," said A Prasanna, head of research at ICICI Securities Primary Dealership. Bond market participants expect a pause in the recent price rally, with yields likely to consolidate after a sharp move. The 10-year benchmark yield has dropped 38 basis points since the start of the financial year, following a 17 bps decline in the prior four months. Shorter duration bond yields have seen a more significant drop, with the five-year yield down 57 bps since April 1 after easing by 26 bps in previous four months. "We do not expect any more announcement for open market purchases in this month, and with expectation of terminal repo rate of 5.50%, the decline in the 10-year benchmark bond yield could bottom out around 6.15%-6.20% levels for now," said VRC Reddy, treasury head at Karur Vysya Bank .
Reuters
15-04-2025
- Business
- Reuters
Indian central bank's liquidity infusion plan pushes bonds to over 3-yr highs
MUMBAI, April 15 (Reuters) - Indian government bond prices jumped to over three-year highs on Tuesday, led by short-end gains after the Reserve Bank of India announced yet another liquidity injection. Market participants expect continued durable liquidity injections this year, following the central bank's latest move and guidance on banking system liquidity. The Reserve Bank of India will buy bonds worth 400 billion rupees ($4.67 billion) and will also conduct 43-day repo for 1.50 trillion rupees on Thursday. Last week, the central bank reduced repo rate for second consecutive time, and also changed its stance to accommodative. WHY ITS IMPORTANT The RBI is expected to keep sufficient surplus in the banking system to ensure policy transmission, and is looking at a level of around 1% of deposits, Governor Sanjay Malhotra said last week. The surplus works out to be in the range of 2.20 trillion rupees to 2.50 trillion rupees, while daily average banking system liquidity surplus stood at around 1.70 trillion rupees for this month. With the central bank in the middle of its rate-easing cycle, market participants believe, comfortable liquidity conditions are a pre-requisite for a quicker and effective monetary policy transmission to aid growth. MARKET REACTION The 10-year benchmark bond yield was down 3 basis points at 6.41%, while the three-year and five-year bond yields fell 5-6 bps to 6.12% and 6.17% respectively. GRAPHIC KEY QUOTES "The indicative commitment may still require (net) durable liquidity injection of around 3 trillion rupees. Out of this, we expect around 90% to be via OMO purchases and balance via fx swaps," said A Prasanna, head of research at ICICI Securities Primary Dealership. "RBI's surprise announcement demonstrates its commitment to maintain ample liquidity. This move is likely to sustain the bullish momentum in yields, potentially driving 10-year yield below 6.40%, with shorter duration bond yields witnessing a further slump," said VRC Reddy, treasury head at Karur Vysya Bank. ($1 = 85.6700 Indian rupees)
Reuters
29-01-2025
- Business
- Reuters
India bond investors eye small rise in government borrowing, expect yields to decline
MUMBAI, Jan 29 (Reuters) - The Indian federal government's market borrowing is seen rising marginally in fiscal year 2025-26, which investors expect will be easily absorbed given the improving banking liquidity and strong inflows into insurance and pension funds. India's budget for the next financial year starting April 1 will be announced on Saturday. A Reuters poll of economists forecasts a fiscal deficit of 4.5% of GDP and a gross borrowing of 14.28 trillion rupees (about $165 billion). For 2024-25, the government budgeted to borrow 14.01 trillion rupees from the bond market. "Over the years the pressure of absorbing government bond supply has abated due to increasing demand from long-term investors," A Prasanna, head of research at ICICI Securities Primary Dealership, said. "Since the last few years, we have seen share of household savings going into insurance and retirement products is rising, which is contributing to demand. So the demand situation should remain strong going ahead," he said. Bond yields have eased over last few days on bets that the central bank will cut rates on Feb. 7 after it announced a host of liquidity measures. Investors expect the rally in bonds to continue after the budget unless borrowings are significantly higher than expected. "I expect the gross borrowing to be largely unchanged from the current year, which will not have any negative impact on the market," Vijay Sharma, senior executive vice president at PNB Gilts, said. The borrowings could be lower if New Delhi chooses to switch bonds with the central bank. ICICI Securities Primary Dealership expects such bond swaps worth 1 trillion rupees, which would lower the borrowing to 13.30 trillion rupees. GREEN BONDS Despite the limited interest, investors expect green bonds will continue to be part of the borrowing, although they hope for an elongation of duration. "Given lack of demand in 10-year green bond, we expect cut in supply of 10-year green bonds and the same portion can be increased for 30-year green bonds," said Rahul Bhuskute, CIO, Bharti AXA Life Insurance Bhuskute expects green bond supply in the range of 350 billion rupees to 400 billion rupees against the 117 billion rupees issued this year. "There is natural demand for long-term green bonds from insurance companies as there is very little issuance from state-run companies and corporates that gets categorised as infrastructure, beyond the 10-year segment," said Ketan Parikh, head-fixed income, ICICI Prudential Life Insurance. ($1 = 86.5170 Indian rupees)
