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Business Recorder
04-08-2025
- Business
- Business Recorder
India central bank seen holding rates, but US tariffs raise odds of cut
MUMBAI: India's central bank is expected to hold rates steady on Wednesday, but the odds of another cut have risen after the United States slapped steep tariffs on Indian exports last week, adding to pressure on growth even as inflation stays subdued. A large majority of economists, or 44 of 57, in a July 18–24 Reuters poll expect the Reserve Bank of India's monetary policy committee (MPC) to hold the repo rate at 5.50% on August 6. However, sentiment has shifted following the tariff announcement. 'Even without that tariff announcement, a case could be made for a 25 basis point rate cut. The 25% tariff rate is an added growth shock,' ANZ Research said, adding that both growth and inflation are likely to undershoot the RBI's forecasts. The RBI delivered a larger-than-expected 50bp cut in June and shifted its stance to 'neutral', signalling that further moves would depend on incoming data. India's manufacturing sector expanded at its fastest pace in 16 months in July, with the HSBC-S&P Global PMI rising to 59.1. But business confidence fell to a three-year low, with firms citing competitive pressures and inflation concerns — a sign that underlying demand may be softening. India's annual retail inflation slowed to a more than six-year low of 2.10% in June, near the lower end of the central bank's tolerance band, as food prices continued to ease. Inflation is seen falling to a record low in July. 'While this backdrop is conducive for further monetary easing, we believe it is not yet compelling enough to deliver a fourth straight rate cut and exhaust the policy arsenal,' said Aastha Gudwani, India chief economist at Barclays. RBI Governor Sanjay Malhotra said last month the central bank had won the battle against inflation but the war was ongoing, and future policy decisions would be guided by the outlook for growth and inflation rather than current levels. Nomura also said the bar for an August cut is high after the June easing and stance shift, though it raised the probability of a cut to 35% from 10% earlier. 'Neither bonds nor the swaps market is pricing in a rate cut on Wednesday, and if it happens, we could actually see a rally. Currently the base case is a dovish commentary and a pause on rates,' a trader at a state-run bank said. Traders are also awaiting the announcement of a revised liquidity framework, which may come alongside the policy.
Time of India
04-08-2025
- Business
- Time of India
Will RBI cut rates? Most economists expect pause
MUMBAI: Economists are split on whether RBI's monetary policy committee will continue cutting rates, but most expect it to pause at the August 6 meeting to assess the impact of earlier reductions. Tired of too many ads? go ad free now Some economists point to softening data. Industrial production as measured by its index slowed to a 10-month low of 1.5%. Credit growth is also weaker, including a marked drop in home loans. Also supporting a rate cut is inflation running below projections. Soumya Kanti Ghosh, group chief economist at SBI there's no use in holding off on cutting interest rates in Aug. If inflation is going to stay low and steady even in FY27, the central bank shouldn't wait. He warned that if RBI wrongly assumes that low inflation is temporary and decides not to cut rates, inflation stays low for a long time, and the economy keeps slowing down. A cut now, he added, could support demand during the upcoming festive season. "A frontloaded rate cut in Aug could bring early Diwali... Even festive season is frontloaded in FY26... Empirical evidence suggests a strong pick-up in credit growth whenever festive season has been early and has been preceded with a rate cut." Others urge caution. Having already lowered the repo rate by 100 basis points (1 percentage point) over three consecutive meetings, RBI may prefer to pause, allowing the effects of previous cuts to ripple through the economy. A note by CareEdge Ratings noted that while inflation is easing and external risks to growth are rising, the central bank may choose to wait. It expects RBI to maintain its 6.4% growth forecast while slightly reducing its inflation outlook for FY26. Tired of too many ads? go ad free now The US tariff uncertainty is pushing the RBI panel toward a cautious, measured approach, most likely opting for a pause or a "dovish hold" in August while leaving the door open for future policy action. Barclays' India chief economist Aastha Gudwani also expects the central bank to stay put in Aug. "While this backdrop is conducive for further monetary easing, we believe it is not yet compelling enough to deliver a fourth straight rate cut, and exhaust the policy arsenal," she said. Gudwani expects a "dovish pause" with RBI retaining a neutral stance and possibly delivering a final 25bps cut in October.
Indian Express
15-06-2025
- Business
- Indian Express
Early food price data suggests June CPI inflation may fall further to 2-2.1%
India's headline retail inflation rate may fall further to around 2 per cent in June going by daily food price data for the first half of the month after a decline in food inflation to a 43-month low of 0.99 per cent helped pull down inflation based on the Consumer Price Index (CPI) to a 75-month low of 2.82 per cent in May. According to data from the Department of Consumer Affairs, prices of four of the five pulses for which the department collects data are down 0.2-1.8 per cent on average so far in June compared to May, with only masoor dal more expensive on a sequential basis, albeit by a minor 0.1 per cent. Prices of cereals have either declined or are largely flat in the first few days of the month. Meanwhile, spices are continuing to become cheaper: after falling 1.5-2.6 per cent month-on-month in May, prices of cumin seeds, red chillies, and coriander powder are down 0.4-1.9 per cent so far in June. The June CPI inflation print will also benefit from an extremely favourable base effect, while will help drag down inflation close to the lower end of the Reserve Bank of India's (RBI) mandated target range of 2-6 per cent. To be sure, vegetables have become dearer over the last couple of weeks. As per the consumer affairs department, prices of brinjals are up 5.5 per cent month-on-month so far in June, while those of tomatoes are up a huge 19.9 per cent. Potatoes and onions, however, are seemingly cancelling each other out: while the price of the former is up 2.5 per cent, onions are down 2.2 per cent. 'Based on the month-to-date retail food price data, we are tracking June inflation at ~2.1 per cent y/y. While price pressures will remain contained due to base effects, we have started witnessing the typical summer increase in vegetable prices in the early days of June. That said, these increases for now appear to be smaller compared with the past two years,' Barclays' economists led by Aastha Gudwani said in a note last week. Japanese brokerage Nomura's economists see June CPI inflation tracking at 2 per cent, while Soumya Kanti Ghosh, State Bank of India's Group Chief Economic Adviser, noted headline inflation 'sans a la tomatina could rapidly descend towards 2 per cent or below by July'. The RBI expects CPI inflation to average 2.9 per cent in the first quarter of the current fiscal. Even if inflation stays unchanged around 2.8 per cent in June, the central bank's quarterly forecast will be met. Even though the RBI on June 6 lowered its inflation forecast for 2025-26 by 30 basis points (bps) to 3.7 per cent, most economists think the central bank's projection will be undershot meaningfully, with ICICI Bank cutting its full-year forecast to 3.3 per cent in light of the May CPI data, joining Nomura at the lower end of economists' projections. Beyond the ongoing quarter, the RBI expects inflation to rise to 3.4 per cent in July-September, 3.9 per cent in October-December, and end the fiscal at 4.4 per cent. However, according to HSBC, inflation is likely to average around 2.5 per cent for the next six months. 'It is likely that inflation in April-December period will average lower than RBI forecast, with our estimates pegged to be in the 2 per cent handle throughout this period. However, inflation in January-March next year may exceed 4.5 per cent… It is likely that central bank has been conservative with its forecasts, and has also attempted to communicate a more smoothed quarterly profile, leading to disparities versus our own forecasts,' ICICI Securities Primary Dealership said in a report. Siddharth Upasani is a Deputy Associate Editor with The Indian Express. He reports primarily on data and the economy, looking for trends and changes in the former which paint a picture of the latter. Before The Indian Express, he worked at Moneycontrol and financial newswire Informist (previously called Cogencis). Outside of work, sports, fantasy football, and graphic novels keep him busy. ... Read More
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Business Standard
25-05-2025
- Business
- Business Standard
Agri output likely to propel India's Q4 GDP growth to 4-quarter high
Growth in the Indian economy likely gained momentum to touch at least a four quarter high in Q4 (January - March) of FY 25 after witnessing moderate growth rates in the preceding three quarters, owing to strong showing in agricultural output that likely lifted rural consumption demand, trade, hotels and transport segment and construction sector, according to analysts. During the first three quarters of FY25, the economy grew at 6.5 per cent, 5.6 per cent, and 6.2 per cent, respectively. The National Statistics Office (NSO) has projected the FY25 growth rate at 6.5 per cent, implicitly assuming 7.6 per cent growth in the fourth quarter of FY25. The statistics ministry is scheduled to release the provisional estimates of national income for FY25 and GDP data for Q4 of FY25 on May 30. The NSO will release the Q4 growth numbers and the provisional estimates of gross domestic product (GDP) data for FY25 on Friday. High-frequency indicators like fertiliser sales (5.4 per cent) and domestic tractor sales (23.4 per cent) which can be used as proxy for agriculture sector growth saw sequential uptick during the fourth quarter. Though growth in agri credit (11.3 per cent) moderated, it still managed to remain in double digits. 'We think the agriculture sector growth is likely to show improvement, as suggested by advance estimates of crop production - which show record high wheat production. Accordingly, we estimate agriculture GVA growth at 5.8 per cent in Q4, accelerating from 5.6 per cent in Q3,' said Aastha Gudwani, India chief economist, Barclays. The strong agri output and improvement in real rural wage growth (2.3 per cent) is expected to have supported rural demand in Q4, even as urban demand remains subdued. 'According to the Neilsen IQ survey, rural FMCG sales volume growth remains strong at 8.4 per cent in Q4. That said, there isn't a uniform improvement in rural indicators with subdued two-wheeler sales and diesel consumption growth,' says Gaura Sengupta, chief economist, IDFC Bank. Indicators like passenger vehicle sales (2.3 per cent), consumer goods production (1 per cent) and personal loans (14 per cent) which reflect urban consumption moderated during the quarter. 'Real urban wage growth remains in the low single digit. FMCG sales volume growth in urban areas has weakened to 2.6 per cent. Electronic payments indicators also confirm subdued urban demand with slowdown in UPI, credit and debit card transactions growth,' adds Sengupta. However, high-frequency indicators like domestic air passenger traffic (12 per cent), toll collection (17.2 per cent), E-way bill collections (19.4 per cent) and port cargo traffic (3.7 per cent) which can be used as a proxy for 'trade, hotels and transport' segment growth, saw sequential uptick during the fourth quarter. In the services sector, higher steel consumption (11.8 per cent) and cement production (12.4 per cent) during the quarter also reflected improved construction sector growth. 'GDP growth in Q4 is likely to be supported by strong momentum in the hotels & transport segment. Anecdotal evidence shows travel activities were up in Q4 on the back of Kumbh mela and major concerts. [Alongwith] foreign tourist arrivals contracted by 1.3 per cent in Q4, lower than a contraction of 3 per cent in Q3,' said CARE Ratings in a note. Meanwhile, growth in the industrial sector is expected to remain subdued which can be gauged from proxy indicators like index of industrial production (3.6 per cent) and iron production (7.3 per cent) which saw a slowdown during the quarter.
Economic Times
21-05-2025
- Business
- Economic Times
Barclays projects 7.2% growth in Q4 for India amid tax surge and improvement in agriculture sector
Live Events (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel The Indian economy is projected to expand by 7.2% in the fourth quarter of FY25, due to a sharp increase in net indirect tax growth and improvement in the agriculture sector, according to agriculture sector is expected to show improvement in Q4, with the gross value added (GVA) rising to 5.8% compared to 5.6% in Q3, it noted. The net indirect taxes grew by 30% year-on-year in the January-March the industrial sector faced a slowdown in Q4, which trimmed 9 basis points off from headline gross domestic product (GDP), said GDP grew by 6.2% in the third quarter.'With monetary easing commencing only in February and transmission still working its way through the real economy amid flush liquidity conditions, we expect a lower cost of capital to finally aid industrial growth going ahead,' said Aastha Gudwani, India chief economist, National Statistical Office (NSO) will release the GDP figures for Q4FY25 on May a separate note, Nomura projected GDP growth of 6.7% in Q4, citing moderation in private consumption, fixed investment and exports.'But a sharper contraction in import growth should mean a positive contribution from net exports to overall GDP growth,' it April, the US imposed a 26% duty on Indian goods, which was subsequently paused for 90 days until July 9. However, the baseline tariff of 10% remains in effect.'The 90-day tariff reprieve offered by President Donald Trump is expected to provide some stability to export-oriented sectors,' said will also release provisional estimates for FY25 on May and Nomura forecast a GDP growth of 6.4% and 6.2%, respectively, for FY25 -- lower than the government's estimate of 6.5% and the Reserve Bank of India's (RBI) 6.6%.Morgan Stanely on Wednesday said that domestic demand will support the economy in FY26, amidst uncertainty from external factors, projecting a growth of 6.2%.'Within domestic demand, we expect consumption recovery to become more broad-based with urban demand improving and rural consumption levels already robust,' it pegs GDP growth at 6.5%, while Nomura is more cautious, projecting 5.8% growth, citing sluggish urban consumption, moderating credit growth, and global slowdown due to inflation is expected to provide support to the economy in the current fiscal year. The average inflation rate was 4.6% in Stanley anticipates benign inflation due to lower food prices, likely to prompt the RBI to cut interest rates. Both Morgan Stanley and Nomura expect a 100 basis point rate cut this year. The monetary policy committee of the RBI had cut the policy rates by 25 basis points each in February and April, bringing the rate down to 6%.
