Latest news with #IDFCFirstBank
Zawya
7 days ago
- Business
- Zawya
India GDP growth likely accelerated in March quarter on rural demand, state spending
NEW DELHI - India's economic growth likely picked up pace in the January–March quarter, buoyed by stronger rural demand and higher government spending, even as private firms delayed investments amid global uncertainties. Gross domestic product (GDP) is expected to have grown 6.7% year-on-year in the March quarter, up from 6.2% in the previous three months, according to a Reuters poll of economists. Rural consumption improved during the quarter, while urban demand indicators remained mixed, said Gaura Sen Gupta, chief economist at IDFC First Bank Economic Research. Investment was supported by government spending, she said. The Ministry of Statistics will release March-quarter GDP data and provisional estimates for the 2024-25 (April-March) fiscal year on Friday at 1030 GMT. Some economists expect GDP growth to print significantly above expectations due to a fall in government subsidies. But they caution that true economic growth, as measured by gross value added (GVA), will be lower than the headline number. The calculation of GDP includes indirect taxes and government subsidy payouts which tend to be volatile, while GVA strips out those components. JP Morgan expects March quarter GDP growth at 7.5% year-on-year, while GVA growth is seen lower at 6.7% compared to 6.2% in the previous quarter. RELATIVELY INSULATED India's central bank, the Reserve Bank of India (RBI), expects GDP growth at 6.5% in the fiscal year beginning April 1. At that rate, India remains the fastest growing among major economies and its size could match Japan's this year at $4.18 trillion, according to projections by the IMF. Economists said while the global outlook has weakened amid escalating trade tensions, India appears relatively insulated due to lower dependence on goods trade, tax cuts announced by the government in February and lower interest rates. "Despite the various downside risks, we think the policy coordination between the government and the RBI remains the strongest at this juncture," said Kaushik Das, India chief economist at Deutsche Bank, adding that authorities are showing strong resolve to do "whatever it takes" to support growth. Retail inflation, which eased to a near six-year low of 3.16% in April, alongside a favourable monsoon forecast, is expected to keep food prices in check and pave the way for another policy repo rate cut by the RBI in June. The government's income tax relief, recent fiscal measures and central bank rate cuts, could lift growth to 6.3%–6.8% in the current fiscal year, the finance ministry said.
Reuters
7 days ago
- Business
- Reuters
India GDP growth likely accelerated in March quarter on rural demand, state spending
NEW DELHI, May 30 (Reuters) - India's economic growth likely picked up pace in the January–March quarter, buoyed by stronger rural demand and higher government spending, even as private firms delayed investments amid global uncertainties. Gross domestic product (GDP) is expected to have grown 6.7% year-on-year in the March quarter, up from 6.2% in the previous three months, according to a Reuters poll of economists. Rural consumption improved during the quarter, while urban demand indicators remained mixed, said Gaura Sen Gupta, chief economist at IDFC First Bank Economic Research. Investment was supported by government spending, she said. The Ministry of Statistics will release March-quarter GDP data and provisional estimates for the 2024-25 (April-March) fiscal year on Friday at 1030 GMT. Some economists expect GDP growth to print significantly above expectations due to a fall in government subsidies. But they caution that true economic growth, as measured by gross value added (GVA), will be lower than the headline number. The calculation of GDP includes indirect taxes and government subsidy payouts which tend to be volatile, while GVA strips out those components. JP Morgan expects March quarter GDP growth at 7.5% year-on-year, while GVA growth is seen lower at 6.7% compared to 6.2% in the previous quarter. India's central bank, the Reserve Bank of India (RBI), expects GDP growth at 6.5% in the fiscal year beginning April 1. At that rate, India remains the fastest growing among major economies and its size could match Japan's this year at $4.18 trillion, according to projections by the IMF. Economists said while the global outlook has weakened amid escalating trade tensions, India appears relatively insulated due to lower dependence on goods trade, tax cuts announced by the government in February and lower interest rates. "Despite the various downside risks, we think the policy coordination between the government and the RBI remains the strongest at this juncture," said Kaushik Das, India chief economist at Deutsche Bank, adding that authorities are showing strong resolve to do "whatever it takes" to support growth. Retail inflation, which eased to a near six-year low of 3.16% in April, alongside a favourable monsoon forecast, is expected to keep food prices in check and pave the way for another policy repo rate (INREPO=ECI), opens new tab cut by the RBI in June. The government's income tax relief, recent fiscal measures and central bank rate cuts, could lift growth to 6.3%–6.8% in the current fiscal year, the finance ministry said.
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Business Standard
29-05-2025
- Business
- Business Standard
RBI's net income rises 27.5% to ₹2.69 trillion in FY25 on forex gains
The Indian central bank's net income rose 27.5 per cent in the last financial year to Rs 2.69 trillion ($31.4 billion) as gains from foreign exchange transactions and interest earned on foreign securities surged, its annual report showed on Thursday. The Reserve Bank of India saw a gain of Rs 1.11 trillion from foreign exchange transactions in the year ending March 2025 versus Rs 83,616 crore in the previous year. Interest income from foreign securities rose to 970.07 billion rupees from Rs 65,328 crore a year earlier. The size of the RBI's balance sheet increased by 8.2 per cent to Rs 76.25 trillion. "In FY25, the surge in dollar selling was due to FY25 balance of payments turning negative," said Gaura Sen Gupta, chief economist at IDFC First Bank. "In FY26, we expect balance of payments to be a small positive. Hence the quantum of dollar selling is expected to be moderate." Last week, RBI's board approved the transfer of a record Rs 2.69 trillion as surplus to the government for the last fiscal year as it opted to raise its contingency risk buffer under a revised economic capital framework. In fiscal year 2019, the RBI adopted a new economic capital framework that required it to maintain a contingency risk buffer of 5.5 per cent-6.5 per cent of its balance sheet. Last week, the board changed the range of the contingency risk buffer to 6 per cent plus or minus 1.5 percentage points to provide adequate flexibility and to ensure smoothening of surplus transfer. IDFC Bank's Sen Gupta expects the RBI's dividend this fiscal year to remain similar to levels seen in the previous two years, as interest income will remain substantial and provisioning stable. For the last fiscal year, the RBI's total expenditure rose 7.76 per cent to Rs 69,714 crore, largely due to higher interest spends, and costs related to employees and printing of notes.
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Business Standard
26-05-2025
- Business
- Business Standard
Widening of CRB range aimed at smoothening surplus transfer to govt
The revised Economic Capital Framework (ECF) adopted by the Reserve Bank of India (RBI), which expanded the Contingency Risk Buffer (CRB) range to 4.5–7.5 per cent, is intended to give the central bank greater flexibility to smoothen surplus transfers to the government without significantly impacting fiscal calculations, experts said. Last week, the RBI's central board approved a record ₹2.69 trillion surplus transfer to the government for the financial year 2024–25, while maintaining the CRB at 7.5 per cent—the upper end of the newly revised range. The robust surplus was supported by higher earnings from foreign exchange transactions (gross dollar sales surged to $399 billion in FY25 from $153 billion in FY24), increased interest income from government securities, and lower provisioning for revaluation losses amid possible mark-to-market gains on both foreign and domestic assets. Previously, the CRB range was narrower—between 5.5 and 6.5 per cent. From FY19 to FY22, RBI kept the CRB at 5.5 per cent of its balance sheet. It was increased to 6 per cent in FY23 and further to 6.5 per cent in FY24. 'Increasing the Contingency Risk Buffer (CRB) provides the RBI with greater flexibility, enabling it to smoothen surplus transfers to the government and prevent significant volatility in fiscal calculations,' said Gaura Sen Gupta, Chief Economist, IDFC First Bank. 'In an exceptional year like FY25, the RBI may opt to raise the CRB to 7.5 per cent, thereby transferring a lower surplus. Conversely, during a challenging year, it could reduce the CRB to 4.5 per cent to maintain a reasonably stable surplus transfer,' she said. Gupta added that the move is prudent, particularly in the current volatile global environment, as a large portion of the RBI's foreign currency assets are invested in overseas securities—primarily US Treasuries. The RBI's central board adopted the revised ECF based on the recommendations of a committee chaired by Bimal Jalan. The expert committee had suggested that the ECF be reviewed every five years. Following this review, the board concluded that the existing ECF had successfully ensured a resilient balance sheet and healthy surplus transfers to the government. However, certain adjustments were made to strengthen the framework in light of emerging risks. 'The revised ECF provides requisite flexibility year-on-year to the central board in the maintenance of risk buffers, considering prevailing macroeconomic and other factors, while also ensuring the needed intertemporal smoothening of the surplus transfer to the government,' the RBI said. According to a Barclays report, the revision addresses the uneven nature of past transfers: ₹2.1 trillion was transferred in FY24—the highest ever—more than double the ₹0.9 trillion transferred in FY23. In comparison, FY22 saw a much lower transfer of ₹0.3 trillion, the smallest in over a decade. 'The reason they have widened it is to provide flexibility in uncertain environments,' said Indranil Pan, Chief Economist, Yes Bank. 'If, in the future, they feel the risk buffer is no longer needed to the same extent, they can reduce it.'
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Business Standard
26-05-2025
- Business
- Business Standard
India GDP growth likely picked up in Q4 on strong rural spending: Poll
Indian economic growth likely picked up last quarter, a Reuters poll of economists found, in part from strength in rural spending related to better agricultural output even as urban spending likely remained more subdued. Gross domestic product (GDP) in Asia's third-largest economy likely grew 6.7 per cent year-on-year in the January-March period up from 6.2 per cent the previous quarter, according to the median forecast from a May 19-23 Reuters poll of 56 economists. Forecasts ranged from 5.8 per cent to 7.5 per cent. "If you look at the real growth momentum ... we are seeing some signs of a pickup on the rural side, by the fact that crop output is better, followed by moderation in inflation pressures," said Gaura Sengupta, chief economist at IDFC First Bank. Economists at Citi wrote "resilient (agricultural) activity continues to bode well for rural consumption," adding that they "remain bearish on urban consumption" in the first half of the current fiscal year, with a recovery driven by policy stimulus. The Reserve Bank of India is expected to cut interest rates for a third consecutive meeting in June. But Standard Chartered's head of India economic research, Anubhuti Sahay, said any growth improvement was mainly driven by the positive impact of net indirect taxes as subsidy payments were significantly lower during the period. Economic activity as measured by gross value added (GVA), considered a more stable gauge of growth and excludes indirect taxes and subsidies, expanded a modest 6.4 per cent in the first three months of 2025 compared to 6.2 per cent the previous quarter. Without stronger domestic demand, GDP growth will continue to rely heavily on government spending, as it has for years. "The recovery is possibly more in numbers than in real improvement in activity. Weak investment prospects, exacerbated by struggling manufacturing suggest a growth recovery is multiple quarters away," said Kunal Kundu, India economist at Societe Generale. "There was some sense of improvement in rural demand but real wages are still not showing signs of meaningfully moving up. Rural demand is ... not strong enough to be an important growth driver on its own as it's just showing some signs of moving up from a weak base, while urban demand continues to be weak." Economists also cautioned that erratic US trade policy since the start of the year presents a shaky backdrop for future growth prospects. A separate Reuters poll taken last month found US tariffs had negatively hit business sentiment, which bodes poorly for a long-expected pickup in corporate spending. "Private investments ... whatever interest rate cuts you do, I don't think will move significantly higher simply because private investments will be determined more by a relatively certain atmosphere," said Indranil Pan, chief economist at Yes Bank. "It's ultimately the outlook from the demand and overall sentiment ... that can help, which currently is unfortunately not getting any help because of the uncertainty that is there in the global system."
