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Business Recorder
25-04-2025
- Business
- Business Recorder
India economic outlook dims further as US tariffs dent business sentiment: Reuters poll
BENGALURU: The Indian economy will grow a bit slower than previously thought this fiscal year, according to economists in a Reuters poll who said U.S. tariffs have negatively impacted business sentiment, raising concerns about already weak private investment. Gross domestic product (GDP) growth in the world's fifth-largest economy is expected to average 6.3% this fiscal year, according to an April 15-24 Reuters poll of 54 economists, the same pace as expected for the year just ended. This fiscal year's forecast is a downgrade from 6.5% in a March poll but is slightly above the International Monetary Fund's recently-updated forecast for 6.2%. But it is a dramatic slowdown from the fiscal year 2023-24 when the economy grew 9.2%. Economists say beneath the headline growth numbers is an economy not generating enough well-paying jobs for millions of young people entering the labour market every year. Despite the government stepping up its infrastructure spending, private sector investment has largely remained stagnant over the past decade which has generated growth well below the economy's true potential. A proposed 26% U.S. tariff on Indian goods imports, currently paused for 90 days, is also not helping even though most of India's exports to the U.S. are services. 'Middle-class Indians are struggling. Residential building sales, passenger vehicles and two-wheelers (sales) have declined… It is important domestic policies focus on the root cause,' said Kunal Kundu, India economist at Societe Generale. Kundu said 'India needs a 1991 moment,' referring to a landmark campaign by former Prime Minister Manmohan Singh, then finance minister, to open up the economy to encourage foreign investment and competition. 'We believe the tariff war offers a perfect opportunity for India to embark on this much-needed journey. Otherwise, despite being the fastest-growing large economy in the current low global growth environment, India is likely to fall significantly short of its long-term objective of becoming a developed nation.' Asked how U.S. tariffs have affected business sentiment in India 60% of economists, 21 of 35, said the impact was negative or very negative. Fourteen said it was neutral. 'Business sentiment has certainly taken a hit because no business today wants to take a call under an uncertain and volatile environment…(and) investment is the most adversely affected component on account of trade tariffs,' said Kanika Pasricha, chief economic advisor at Union Bank of India. 'Sectors that were actually willing to invest like renewables, refineries, steel and cement to some extent are unlikely to elongate their capital expenditure plans.' With U.S. recession fears rising and consumer inflation remaining below the 4% medium-term target for the past two months the Reserve Bank of India's (RBI) mild rate-cutting cycle is expected to end in August at 5.50%, a quarter-point lower than the previous survey. The RBI is widely expected to cut rates for a third consecutive meeting in June to 5.75%. 'The unexpected drop in inflation… has created greater scope for monetary policy support to growth,' said Dhiraj Nim, economist at ANZ. Consumer inflation was expected to average 4.0% this fiscal year before rising to 4.3% next year.
Time of India
25-04-2025
- Business
- Time of India
India's GDP growth outlook trimmed to 6.3% as private investment stalls and US tariffs loom: Report
AI-generated image India's economy is expected to grow at a slower pace in the current fiscal year, weighed down by subdued private sector investment and uncertainty surrounding American tariffs, according to a Reuters survey of economists. The fifth-largest economy in the world is projected to expand at an average rate of 6.3 per cent in FY2024 -25, based on a poll conducted from April 15-24 with participation from 54 economists. While this matches last year's growth, it marks a slight downgrade from the 6.5 per cent forecast in a March survey. It still remains marginally above the International Monetary Fund's (IMF) recent projection of 6.2 per cent. However, this represents a significant drop from the 9.2 per cent GDP growth recorded in fiscal year 2023–24, highlighting a slowdown in momentum. Economists say the headline figures mask deeper structural issues, including the economy's inability to generate enough high-paying jobs for its growing youth population. Despite government-led infrastructure investments, private sector capital expenditure has remained stagnant over the past decade, leaving India operating below its potential. The situation is further complicated by the proposed 26 per cent US tariff on Indian imports - currently suspended for a 90-day window starting April 10 — which has raised concerns despite India's services-heavy exports to the US. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like News For Jack Nicholson, 87, He Has Been Confirmed To Be... Reportingly Undo 'Middle-class Indians are struggling. Residential building sales, passenger vehicles, and two-wheeler sales have declined. It's important that domestic policies address the root causes,' said Kunal Kundu, India economist at Société Générale. 'India needs a 1991 moment,' he added, referencing the landmark liberalisation campaign led by then-finance minister Manmohan Singh. 'The tariff war offers a perfect opportunity to push for structural reforms. Without them, even as the fastest-growing large economy in a low global growth environment, India may fall well short of its long-term ambition to become a developed nation.' In the survey, most economists said US tariffs have had a negative or severely negative impact on business sentiment. Some described the effect as neutral. 'Business sentiment has certainly taken a hit — no business wants to make investment decisions in an uncertain and volatile environment. Investment is the most adversely affected component of the economy due to trade tariffs,' said Kanika Pasricha, chief economic advisor at Union Bank of India. She added that sectors previously poised for growth — including renewables, refineries, steel, and cement — may now scale back or delay capital expenditure plans. Meanwhile, with concerns of a potential US recession and India's consumer inflation staying below the 4 per cent medium-term target for two straight months, the Reserve Bank of India (RBI) is expected to continue its moderate rate-cutting cycle. The central bank is likely to reduce rates by 25 basis points in June to 5.75 per cent, and possibly conclude the easing cycle in August at 5.50 per cent, according to the survey. 'The unexpected drop in inflation... has created greater scope for monetary policy support to growth,' noted Dhiraj Nim, economist at ANZ. For FY2024–25, consumer inflation is projected to average 4.0 per cent, rising slightly to 4.3 per cent in the following fiscal year. This report based on Reuters survey comes days after the World Bank revised its prediction on India's growth to 6.3 per cent for FY 2025-26, cut from its previous estimate of 6.7 per cent. According to the report, as quoted by news agency PTI, "In India, growth is expected to slow from 6.5 per cent in FY2024-25 to 6.3 per cent in FY 2025-26, as the benefits to private investment from monetary easing and regulatory streamlining are expected to be offset by global economic weakness and policy uncertainty." The organisation's assessment indicates that India's current fiscal performance fell short of projections, primarily due to reduced private sector investments and unfulfilled public capital expenditure objectives. Read more: World Bank cuts India's FY26 growth forecast to 6.3% citing global headwinds Stay informed with the latest business news, updates on bank holidays and public holidays . Master Value & Valuation with ET! Learn to invest smartly & decode financials. Limited seats at 33% off – Enroll now!
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Business Standard
25-04-2025
- Business
- Business Standard
India's economic outlook dims as US tariffs hit business sentiment: Poll
The Indian economy will grow a bit slower than previously thought this fiscal year, according to economists in a Reuters poll who said US tariffs have negatively impacted business sentiment, raising concerns about already weak private investment. Gross domestic product (GDP) growth in the world's fifth-largest economy is expected to average 6.3 per cent this fiscal year, according to an April 15-24 Reuters poll of 54 economists, the same pace as expected for the year just ended. This fiscal year's forecast is a downgrade from 6.5 per cent in a March poll but is slightly above the International Monetary Fund's recently-updated forecast for 6.2 per cent. But it is a dramatic slowdown from the fiscal year 2023-24 when the economy grew 9.2 per cent. Economists say beneath the headline growth numbers is an economy not generating enough well-paying jobs for millions of young people entering the labour market every year. Despite the government stepping up its infrastructure spending, private sector investment has largely remained stagnant over the past decade which has generated growth well below the economy's true potential. A proposed 26 per cent US tariff on Indian goods imports, currently paused for 90 days, is also not helping even though most of India's exports to the US are services. "Middle-class Indians are struggling. Residential building sales, passenger vehicles and two-wheelers (sales) have declined... It is important domestic policies focus on the root cause," said Kunal Kundu, India economist at Societe Generale. Kundu said "India needs a 1991 moment," referring to a landmark campaign by former Prime Minister Manmohan Singh, then finance minister, to open up the economy to encourage foreign investment and competition. "We believe the tariff war offers a perfect opportunity for India to embark on this much-needed journey. Otherwise, despite being the fastest-growing large economy in the current low global growth environment, India is likely to fall significantly short of its long-term objective of becoming a developed nation." Asked how US tariffs have affected business sentiment in India 60 per cent of economists, 21 of 35, said the impact was negative or very negative. Fourteen said it was neutral. "Business sentiment has certainly taken a hit because no business today wants to take a call under an uncertain and volatile environment...(and) investment is the most adversely affected component on account of trade tariffs," said Kanika Pasricha, chief economic advisor at Union Bank of India. "Sectors that were actually willing to invest like renewables, refineries, steel and cement to some extent are unlikely to elongate their capital expenditure plans." With US recession fears rising and consumer inflation remaining below the 4 per cent medium-term target for the past two months the Reserve Bank of India's (RBI) mild rate-cutting cycle is expected to end in August at 5.50 per cent, a quarter-point lower than the previous survey. The RBI is widely expected to cut rates for a third consecutive meeting in June to 5.75 per cent. "The unexpected drop in inflation... has created greater scope for monetary policy support to growth," said Dhiraj Nim, economist at ANZ. Consumer inflation was expected to average 4.0 per cent this fiscal year before rising to 4.3 per cent next year.
Reuters
25-04-2025
- Business
- Reuters
India economic outlook dims further as US tariffs dent business sentiment: Reuters poll
BENGALURU, April 25 (Reuters) - The Indian economy will grow a bit slower than previously thought this fiscal year, according to economists in a Reuters poll who said U.S. tariffs have negatively impacted business sentiment, raising concerns about already weak private investment. Gross domestic product (GDP) growth in the world's fifth-largest economy is expected to average 6.3% this fiscal year, according to an April 15-24 Reuters poll of 54 economists, the same pace as expected for the year just ended. This fiscal year's forecast is a downgrade from 6.5% in a March poll but is slightly above the International Monetary Fund's recently-updated forecast for 6.2%. But it is a dramatic slowdown from the fiscal year 2023-24 when the economy grew 9.2%. Economists say beneath the headline growth numbers is an economy not generating enough well-paying jobs for millions of young people entering the labour market every year. Despite the government stepping up its infrastructure spending, private sector investment has largely remained stagnant over the past decade which has generated growth well below the economy's true potential. A proposed 26% U.S. tariff on Indian goods imports, currently paused for 90 days, is also not helping even though most of India's exports to the U.S. are services. "Middle-class Indians are struggling. Residential building sales, passenger vehicles and two-wheelers (sales) have declined... It is important domestic policies focus on the root cause," said Kunal Kundu, India economist at Societe Generale. Kundu said "India needs a 1991 moment," referring to a landmark campaign by former Prime Minister Manmohan Singh, then finance minister, to open up the economy to encourage foreign investment and competition. "We believe the tariff war offers a perfect opportunity for India to embark on this much-needed journey. Otherwise, despite being the fastest-growing large economy in the current low global growth environment, India is likely to fall significantly short of its long-term objective of becoming a developed nation." Asked how U.S. tariffs have affected business sentiment in India 60% of economists, 21 of 35, said the impact was negative or very negative. Fourteen said it was neutral. "Business sentiment has certainly taken a hit because no business today wants to take a call under an uncertain and volatile environment...(and) investment is the most adversely affected component on account of trade tariffs," said Kanika Pasricha, chief economic advisor at Union Bank of India. "Sectors that were actually willing to invest like renewables, refineries, steel and cement to some extent are unlikely to elongate their capital expenditure plans." With U.S. recession fears rising and consumer inflation remaining below the 4% medium-term target for the past two months the Reserve Bank of India's (RBI) mild rate-cutting cycle is expected to end in August at 5.50%, a quarter-point lower than the previous survey. The RBI is widely expected to cut rates for a third consecutive meeting in June to 5.75%. "The unexpected drop in inflation... has created greater scope for monetary policy support to growth," said Dhiraj Nim, economist at ANZ. Consumer inflation was expected to average 4.0% this fiscal year before rising to 4.3% next year. (Other stories from the April Reuters global economic poll)
Reuters
31-01-2025
- Business
- Reuters
RBI to cut rates to 6.25% in February, followed by one more cut next quarter
BENGALURU, Jan 31 (Reuters) - The Reserve Bank of India (RBI) is set to cut its main policy rate on Feb. 7 followed by just one more cut next quarter, according to economists polled by Reuters, who have kept their views largely unchanged from a month ago. The steady outlook comes despite recent data showing economic growth slowed to an annual 5.4% in the July-September quarter, well below the 8.2% seen in the last fiscal year. In its Feb. 1 budget, the government is not expected to increase infrastructure spending, a main driver of growth in past years, leaving the onus on the RBI to revive the $4 trillion economy. The central bank has injected massive liquidity into the banking system in recent days, which some economists take to mean a rate cut is imminent, despite relatively high inflation. Over 70% of respondents, 45 of 62, in a Jan. 22-30 poll, forecast the RBI would cut its key repo rate by 25 basis points to 6.25% at the conclusion of its Feb. 5-7 meeting, the first chaired by Governor Sanjay Malhotra, a former civil servant appointed late last year. It would be the first rate cut in more than four years, since early in the COVID-19 pandemic. "The new governor's take on growth and currency, unlike his predecessor's, suggests monetary policy is likely to tilt towards supporting growth rather than continuing to be fearful of inflation," said Kunal Kundu, India economist at Societe Generale. "A rate cut is unlikely to lead to a discernible recovery in economic that to materialise, there would need to be a coordinated approach between monetary (and) fiscal policies." Seventeen respondents expected the repo rate to remain at 6.50%, where it has sat for nearly two years, mostly because of above-target inflation. While poll medians reflected expectations that the RBI would cut rates once more to 6.00% next quarter, there was no majority among economists on when such a move would come. SLOWER GROWTH, STICKY INFLATION Growth in Asia's third-largest economy for the fiscal year ending in March is forecast to average 6.4%, before accelerating to 6.5% and 6.6% in the next two years, respectively. No one in the poll expected growth to touch 8%, a rate most economists say is required for India to create well-paying jobs in the world's most populous country, at any point in the two-year forecast horizon. Inflation has stayed above the central bank's medium-term target of 4% for most of the past year. At the same time, the rupee has been steadily weakening, despite substantial intervention from the RBI selling tens of billions of dollars in reserves. Inflation is not expected to fall to or below the mid-point of the RBI's 2-6% target range until at least the middle of next year, according to poll medians. The rupee, which fell nearly 3% against the U.S. dollar last year, remains a risk as sharp rate cuts could fuel more inflation through imports. "The biggest near-term hurdle for the RBI appears to pressure on the exchange rate, reducing the degrees of freedom the RBI has in running an independent monetary policy," wrote Rahul Bajoria, India & ASEAN economist at Bank of America.
