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Business Standard
03-07-2025
- Business
- Business Standard
Banking system liquidity hits 3-year high at $3.74 trillion: RBI data
Banking system liquidity rose further to a net surplus of ₹3.74 trillion, highest since June 1, 2022, latest data by the Reserve Bank of India (RBI) showed. The recent improvement in banking system liquidity can largely be attributed to higher government spending and lower-than-expected goods and services tax (GST) collections, which have eased the usual liquidity pressures. As a result, the liquidity drain was not as sharp as anticipated, dealers said, adding that with RBI already having reduced the Cash Reserve Ratio (CRR), its room for deploying other measures for liquidity withdrawal apart from variable rate reverse repo (VRRR) auction is limited. Further, they said RBI is expected to stick to shorter-tenure VRRR operations so that durable liquidity is not impacted as the regulator is aiming at improving monetary transmission following 100 bps repo rate cut in quick succession. Banks are also unlikely to participate in longer-term VRRRs, as they prefer maintaining flexibility amid fluctuating cash requirements. This makes long-duration liquidity absorption tools less practical in the current environment. 'The main reason behind the liquidity improvement is government expenditure and less GST collections, so the drain of liquidity was not as much as expected. Given that the RBI has cut CRR, they can't deploy any other measure right now apart from VRRR. They will go with shorter tenure VRRR as to not overlap with GST outflows. And banks would not want to park their funds for a longer period, so long term VRRR is also not feasible,' said Indranil Pan, chief economist at YES Bank. The surplus liquidity has kept the overnight weighted average call rate near the Standing Deposit Facility (SDF) rate of 5.25 per cent and below the repo rate of 5.50 per cent. On Thursday, the weighted average call rate – the operating target of the monetary policy – was at 5.27 per cent. Market participants said that the central bank is expected to roll over the seven-day VRRR auction maturing on Friday. The RBI had received bids worth ₹84,975 crore at the VRRR auction, against the notified amount of ₹1 trillion. 'They might increase the quantum, but seven-day tenure seems reasonable,' said a dealer at a state-owned bank. 'We will have to watch what their next step would be, but they will roll-over the amount on Friday,' he added. Since the start of the current calendar year, the RBI has been actively infusing liquidity in the banking system via variable rate repo (VRR) auctions, swaps, and open market operations. The RBI introduced daily VRR auctions in response to liquidity tightness stemming from tax outflows and foreign exchange interventions, which was withdrawn on June 9. Since January, the RBI has injected around ₹9.5 trillion of durable liquidity into the banking system. This infusion helped shift liquidity conditions from a sustained deficit since mid-December to a surplus by March-end. Of the total liquidity injection, ₹5.2 trillion came through open market purchases (including secondary market purchases), while long term VRR auctions and $/₹ buy-sell swaps added ₹2.1 trillion and ₹2.2 trillion, respectively.
The Sun
27-06-2025
- Business
- The Sun
Poll: India set for top growth, but weaknesses linger
BENGALURU: The Indian economy will grow at a mostly steady pace this fiscal year and next after marking a four-year low in 2024-25, according to economists polled by Reuters, who have mostly either kept their forecasts unchanged or made marginal upgrades. That stable outlook comes despite the Reserve Bank of India (RBI) cutting interest rates by a full percentage point since early this year, including an unexpected 50 basis point reduction on June 6, to boost growth in the face of rising global uncertainties. But the world's fastest-growing major economy still earns that title mostly because government capital expenditure remains strong. Gross domestic product (GDP) was forecast to expand 6.4% in the current fiscal year ending March 2026, the June 17-26 Reuters poll of 51 economists found. That is weaker than 6.5% reported for fiscal year 2024-25, which was the slowest since 2020-21. Growth was forecast to pick up modestly to 6.7% in FY26-27. That marks a slight upgrade from last month's poll, which had medians of 6.3% and 6.5%, respectively. 'Most of the growth that was happening was mainly because of the capital expenditures of the government, which will flatten out,' said Indranil Pan, chief economist at Yes Bank. Private sector spending is still trailing far behind, and analysts generally agree the economy is still failing to create enough quality jobs for its large young population. 'One of the biggest challenges for India at the current juncture is per capita income. Job creation has not been strong enough to generate the income needed to support sustainable economic growth,' Pan added. Some economists said there may be downgrades to the GDP outlook in the coming months if New Delhi fails to secure a trade agreement with Washington before the 90-day pause on tariffs comes to an end on July 9. Trade talks between the two sides have stalled over auto parts, steel and farm goods, Indian officials with direct knowledge told Reuters yesterday, dashing hopes of a deal ahead of US President Donald Trump's deadline to impose reciprocal tariffs. But ANZ economist Dhiraj Nim wrote they have upgraded their FY26 growth forecast on hopes that the two countries would reach a trade deal. 'Even so, growth will remain below potential in a challenging global environment, warranting policy support,' he added. The RBI shifted its policy stance to 'neutral' from 'accommodative' on June 6, signalling a likely end to its shallowest rate-cutting cycle in over a decade. – Reuters
Economic Times
27-06-2025
- Business
- Economic Times
India's economy to hold top spot for growth, but underlying weaknesses remain: Poll
Economists predict a steady growth for the Indian economy in the current and next fiscal years, following a four-year low in 2024-25. While government capital expenditure remains strong, private sector spending lags, and job creation needs improvement. Uncertainties surrounding a potential trade agreement with the U.S. and the RBI's policy stance add complexity to the economic outlook. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads The Indian economy will grow at a mostly steady pace this fiscal year and next after marking a four-year low in 2024-25, according to economists polled by Reuters, who have mostly either kept their forecasts unchanged or made marginal stable outlook comes despite the Reserve Bank of India cutting interest rates by a full percentage point since early this year, including an unexpected 50 basis point reduction on June 6, to boost growth in the face of rising global the world's fastest-growing major economy still earns that title mostly because government capital expenditure remains domestic product was forecast to expand 6.4% in the current fiscal year ending March 2026, the June 17-26 Reuters poll of 51 economists is weaker than 6.5% reported for fiscal year 2024-25, which was the slowest since 2020-21. Growth was forecast to pick up modestly to 6.7% in FY marks a slight upgrade from last month's poll, which had medians of 6.3% and 6.5%, respectively."Most of the growth that was happening was mainly because of the capital expenditures of the government, which will flatten out," said Indranil Pan, chief economist at Yes Bank Private sector spending is still trailing far behind, and analysts generally agree the economy is still failing to create enough quality jobs for its large young population."One of the biggest challenges for India at the current juncture ... is per capita income. Job creation has not been strong enough to generate the income needed to support sustainable economic growth," Pan economists said there may be downgrades to the GDP outlook in the coming months if New Delhi fails to secure a trade agreement with Washington before the 90-day pause on tariffs comes to an end on July talks between the two sides have stalled over auto parts, steel and farm goods, Indian officials with direct knowledge told Reuters on Thursday, dashing hopes of a deal ahead of U.S. President Donald Trump's deadline to impose reciprocal ANZ economist Dhiraj Nim wrote they have upgraded their FY 2026 growth forecast on hopes that the two countries would reach a trade deal."Even so, growth will remain below potential in a challenging global environment, warranting policy support," he RBI shifted its policy stance to "neutral" from "accommodative" on June 6, signalling a likely end to its shallowest rate-cutting cycle in over a economists are divided on whether there would be a long pause or another 25-basis-point cut in the final three months of the over half of respondents - 28 of 53 - expected the repo rate to stay at 5.50% in the fourth quarter, while the rest forecast it at 5.25% or inflation was expected to average 3.6% this fiscal year before rising to 4.3% next year, the poll showed.
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Business Standard
27-06-2025
- Business
- Business Standard
India's economy to hold top spot for growth, but weaknesses remain: Poll
The Indian economy will grow at a mostly steady pace this fiscal year and next after marking a four-year low in 2024-25, according to economists polled by Reuters, who have mostly either kept their forecasts unchanged or made marginal upgrades. That stable outlook comes despite the Reserve Bank of India cutting interest rates by a full percentage point since early this year, including an unexpected 50 basis point reduction on June 6, to boost growth in the face of rising global uncertainties. But the world's fastest-growing major economy still earns that title mostly because government capital expenditure remains strong. Gross domestic product was forecast to expand 6.4 per cent in the current fiscal year ending March 2026, the June 17-26 Reuters poll of 51 economists found. That is weaker than 6.5 per cent reported for fiscal year 2024-25, which was the slowest since 2020-21. Growth was forecast to pick up modestly to 6.7 per cent in FY 2026-27. That marks a slight upgrade from last month's poll, which had medians of 6.3 per cent and 6.5 per cent, respectively. "Most of the growth that was happening was mainly because of the capital expenditures of the government, which will flatten out," said Indranil Pan, chief economist at Yes Bank. Private sector spending is still trailing far behind, and analysts generally agree the economy is still failing to create enough quality jobs for its large young population. "One of the biggest challenges for India at the current juncture ... is per capita income. Job creation has not been strong enough to generate the income needed to support sustainable economic growth," Pan added. Some economists said there may be downgrades to the GDP outlook in the coming months if New Delhi fails to secure a trade agreement with Washington before the 90-day pause on tariffs comes to an end on July 9. Trade talks between the two sides have stalled over auto parts, steel and farm goods, Indian officials with direct knowledge told Reuters on Thursday, dashing hopes of a deal ahead of US President Donald Trump's deadline to impose reciprocal tariffs. But ANZ economist Dhiraj Nim wrote they have upgraded their FY 2026 growth forecast on hopes that the two countries would reach a trade deal. "Even so, growth will remain below potential in a challenging global environment, warranting policy support," he added. The RBI shifted its policy stance to "neutral" from "accommodative" on June 6, signalling a likely end to its shallowest rate-cutting cycle in over a decade. But economists are divided on whether there would be a long pause or another 25-basis-point cut in the final three months of the year. Just over half of respondents - 28 of 53 - expected the repo rate to stay at 5.50 per cent in the fourth quarter, while the rest forecast it at 5.25 per cent or lower. Consumer inflation was expected to average 3.6 per cent this fiscal year before rising to 4.3 per cent next year, the poll showed. (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Yahoo
27-06-2025
- Business
- Yahoo
India's economy to hold top spot for growth, but underlying weaknesses remain: Reuters poll
By Pranoy Krishna and Vivek Mishra BENGALURU (Reuters) -The Indian economy will grow at a mostly steady pace this fiscal year and next after marking a four-year low in 2024-25, according to economists polled by Reuters, who have mostly either kept their forecasts unchanged or made marginal upgrades. That stable outlook comes despite the Reserve Bank of India cutting interest rates by a full percentage point since early this year, including an unexpected 50 basis point reduction on June 6, to boost growth in the face of rising global uncertainties. But the world's fastest-growing major economy still earns that title mostly because government capital expenditure remains strong. Gross domestic product was forecast to expand 6.4% in the current fiscal year ending March 2026, the June 17-26 Reuters poll of 51 economists found. That is weaker than 6.5% reported for fiscal year 2024-25, which was the slowest since 2020-21. Growth was forecast to pick up modestly to 6.7% in FY 2026-27. That marks a slight upgrade from last month's poll, which had medians of 6.3% and 6.5%, respectively. "Most of the growth that was happening was mainly because of the capital expenditures of the government, which will flatten out," said Indranil Pan, chief economist at Yes Bank. Private sector spending is still trailing far behind, and analysts generally agree the economy is still failing to create enough quality jobs for its large young population. "One of the biggest challenges for India at the current juncture ... is per capita income. Job creation has not been strong enough to generate the income needed to support sustainable economic growth," Pan added. Some economists said there may be downgrades to the GDP outlook in the coming months if New Delhi fails to secure a trade agreement with Washington before the 90-day pause on tariffs comes to an end on July 9. Trade talks between the two sides have stalled over auto parts, steel and farm goods, Indian officials with direct knowledge told Reuters on Thursday, dashing hopes of a deal ahead of U.S. President Donald Trump's deadline to impose reciprocal tariffs. But ANZ economist Dhiraj Nim wrote they have upgraded their FY 2026 growth forecast on hopes that the two countries would reach a trade deal. "Even so, growth will remain below potential in a challenging global environment, warranting policy support," he added. The RBI shifted its policy stance to "neutral" from "accommodative" on June 6, signalling a likely end to its shallowest rate-cutting cycle in over a decade. But economists are divided on whether there would be a long pause or another 25-basis-point cut in the final three months of the year. Just over half of respondents - 28 of 53 - expected the repo rate to stay at 5.50% in the fourth quarter, while the rest forecast it at 5.25% or lower. Consumer inflation was expected to average 3.6% this fiscal year before rising to 4.3% next year, the poll showed. (Other stories from the June Reuters global economic poll) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
