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Mint
26 minutes ago
- Business
- Mint
Monetary policy: We live in interesting times for interest rates
Now that the National Statistical Office (NSO) has given its verdict on the state of India's economy in 2024-25 and its last quarter, all eyes are turned to the Reserve Bank of India (RBI). In particular, to its six-member rate-setting panel, the Monetary Policy Committee (MPC), which begins its three-day meet on Wednesday. With the key determinant for rate action, retail inflation, having declined for the sixth consecutive month—it was below 3.2% in April by the Consumer Price Index—and GDP growth at 6.5% last fiscal year, the MPC has a fine line to tread. Under RBI's inflation targeting framework, it must keep retail inflation within a band of 2% to 6%, with an eye kept on growth. Also read: RBI poised to cut rates as India eyes a steady takeoff The trade-off of growth versus price stability, never an easy one even at the best of times, is particularly problematic when we seem to have the best of both worlds. India's economy is neither too cool nor too hot. With growth reasonably robust and inflation below RBI's central target, this is our own 'Goldilocks moment.' In such a scenario, what should the MPC do? It has already cut policy rates twice this calendar year, once in February and then again in April, and infused substantial liquidity into the banking system. As for spurring economic activity, bear in mind that the rate of interest on loans is only one of many factors in corporate investment and private spending decisions. Cheaper credit is an incentive to borrow, no doubt, but this can be outweighed by other considerations. The ease of doing business, lack of clarity on the external environment (think of US tariff policy) and the state of domestic consumer demand are all major drivers of investment calls. The odds of making worthy use of money, even if it's available cheaply, is what it comes down to. As for a retail sales boost, income levels matter more than loan rates. Taxpayers have a tax stimulus this year, so they may be inclined to spend more than usual, but at lower earning levels, where people's marginal propensity to consume is higher, consumer demand is driven less by overall GDP expansion than by its distribution. Also note that monetary policy needs to be forward-looking. Any rate action takes about two-three quarters to work its way through the economy. The MPC, therefore, must take a call depending on where it expects to see both growth and inflation six to nine months ahead and act accordingly. Also read: Lenders concerned about education loans as US tightens curbs on student visas Unfortunately, it is impossible to know for sure whether price or growth effects will dominate. While trade turmoil led by US tariffs is likely to raise inflation and slow growth down globally, the extent to which India will suffer similar consequences evades a consensus. The economy's momentum from the previous quarter might be strong, but it faces headwinds. Price stability may look durable, but inflation staying tame cannot be assured. Not surprisingly, different central banks have responded differently to the situation they are in. While some like the Bank of England and European Central Bank have cut rates, others such as the US Federal Reserve and Norway's Norges Bank have not, opting instead to hold rates steady in the face of uncertainty. 'Each to its own' appears to be the motto for central banks around the world. Also read: Mint Explainer: How RBI's latest rate cut, change in stance impact borrowers, depositors Our MPC should march to its own tune, guided by an informed reading of evolving growth-inflation dynamics. Whatever call it takes this week on policy rates, let's hope it's favoured by luck as well.
Mint
3 days ago
- Business
- Mint
Indian economy ‘doing quite well', may grow up to 6.8% in FY26, driven by FDI, urban spending: CEA Nageswaran
Chief Economic Adviser (CEA) Anantha Nageswaran said that the Indian economy is performing well and may achieve a growth rate at the upper end of its 6.3-6.8 per cent projection, provided there are continued measures to promote foreign direct investment and an increase in capital investment by the private sector, along with boosted urban consumption. "All in all, given the global environment, our economy is doing quite well," the CEA told reporters on Friday at a virtual press conference after GDP data for 2024-25 and January-March were released. 'And if we continue with the efforts to bring in more foreign direct investment and the private sector, if it continues its increase in capital investment, which we saw in 2024-25 and urban consumption picks up on the back of let's say, better capital formation, hiring and compensation, then we can probably achieve a growth rate which is at the higher end of this range (6.3-6.8 per cent),' he added. The Indian economy grew by 6.5% in real terms for FY25, aligning with expectations. As per the second advance estimates of National Statistical Office (NSO), the Indian economy was projected to grow at 6.5 per cent in 2024-25. The Reserve Bank of India (RBI) estimated 6.5 per cent GDP growth for the fiscal year 2024-25. Notably, India's GDP grew by 9.2 per cent in FY24, while the economy grew 7.2 per cent in FY23 and 8.7 per cent in FY22. The government also released the official GDP growth data for the January-March quarter on Friday. The economy grew 7.4 per cent for the quarter ended on March 31, 2025. Meanwhile, the growth rate of the Indian economy in the April-June, July-September, and October-December 2024 quarters stood at 6.7 per cent, 5.6 per cent, and 6.2 per cent, respectively. Speaking on the impact of the unusual onset of monsoon and its impact on the vegetable prices, Nageswaran said, 'To say there will be a problem as of now, I think every indication is that crop produce will be good and with adequate inventory, the benign food price trends will continue.' Monsoon rainfall is expected to be above normal in India, particularly in India's key rain-fed agricultural belt, as per IMD. Additionally, monsoon arrived early in several states this year. CEA stated that global growth for 2025 and 2026 is expected to be slow amid the global uncertainties. However, the forecast cuts will be smaller for India in the global cuts. Speaking on inflation, he further said that food inflation is likely to remain low due to a good harvest and above normal monsoon. 'Food Inflation remains benign due to good rabi harvest, higher summer sowing, healthy procurement, and above-normal monsoon. Exports remain robust, forex reserves provide 11 months of import cover. Declining crude oil prices will potentially lower import bills, create fiscal space and alleviate external economic pressures,' CEA said. The government maintains its outlook for 2025-26 growth at 6.3-6.8 per cent, driven primarily by private consumption, particularly the rural rebound, and growth in services exports. Various agencies have projected India's growth to fall within the range of 6.3-6.7 per cent for 2025-26. (With inputs from agencies)
Hindustan Times
3 days ago
- Business
- Hindustan Times
India economy grew 6.5% in FY25, beating forecasts
The Indian economy grew 6.5% in fiscal year 2024-25 and 7.4% in the quarter ending March, according to data released by the National Statistical Office (NSO) on Friday that underlines the nation's position as the fastest growing economy in the world. In current dollar terms, India's gross domestic product (GDP) is now $3.9 trillion compared to $3.6 trillion in 2023-24, according to an estimate by research agency Crisil after the data was released. According to the International Monetary Fund, India is on pace to become the fourth largest economy in the world with GDP of $4.3 trillion in 2025-26. Pointing out that India is the fastest growing economy for the fourth year in a row, finance minister Nirmala Sitharaman said that all the engines of growth– manufacturing, services and agriculture-- have propelled the Indian economy in the January-March quarter and indicated that the prospects of a good monsoo would maintain the momentum in the current fiscal year. 'India is sustaining this growth as the fastest growing economy now for the fourth year continuously without a break, thanks to the work of our small, medium and large industries, which are coming in and making sure our manufacturing capacity, our service capacity, are all intact. And agriculture has also sustained us,' she said at an awards function in the Capital . The data shows that the Indian economy has lost momentum compared to fiscal year 2023-24 when the GDP growth was 9.2%. To be sure, that growth was largely a reflection of pent-up demand after the Covid pandemic, a fact also highlighted by Sitharaman in her speech. But private investment, required to sustain growth beyond 7%, continues to remain sluggish. Growth for the fiscal and the quarter was higher than most analysts' estimates. A Bloomberg poll of economists had expected annual GDP growth of 6.3% and 6.8% for the quarter. The primary reason for the divergence between analyst estimates and the actual numbers is the wide gap between GDP (7.4%) and Gross Value Added (6.8%) growth in the March quarter. GDP is the sum of GVA and indirect taxes minus subsidies. Sajjid Chinoy, Chief India Economist at J.P. Morgan, who had projected a 6.5% and 7.5% growth number for the fiscal year and the March quarter, that were closer to the actual numbers, had expected this variance due to a fall in subsidies. 'But, as with several GDP prints in recent years, the (GDP versus GVA) outturn will need careful interpretation, because it will be driven substantially by a sharp fall in subsidy payouts in the last quarter, compared to the previous year', Chinoy had written in a GDP preview research note released on May 28. To be sure, the March quarter GDP numbers are not surprising when seen in the context that even the second advance estimate of GDP released by the NSO in February had assumed a growth rate of 7.6% in the March quarter while projecting a 6.5% annual growth rate. While fiscal consolidation has played a role in the large gap between GDP and GVA growth in the March quarter, its impact was less than in 2023-24. India's fiscal deficit fell sharply from 5.6% in 2023-24 to 4.8% in 2024-25, according to the provisional data released on Friday. But it is expected fall only 40 basis points to 4.4% in 2025-26. With the larger economic situation largely unchanged between the second advance estimates released in February 2025 and provisional data released on Friday, what are the key takeaways from the disaggregated GDP data? Private consumption seems to have regained its primacy as the growth driver while capital formation and government spending seem to be losing steam. The latter is to be expected as government capex growth has already peaked and fiscal consolidation is weighing on government's revenue expenditure. Government Final Consumption Expenditure and Gross Fixed Capital Formation lost momentum growing at 2.3% and 7.1% in 2024-25 compared to 8.1% and 8.8% in 2023-24. Private Final Consumption Expenditure grew at 7.2% in 2024-25 compared to 5.6% in 2023-24. 'Consumption growth outpaced GDP, primarily driven by robust rural demand supported by a strong agricultural sector…We anticipate that consumption will remain robust in the current fiscal year, buoyed by favourable domestic factors such as normal monsoon patterns, the transmission of interest rate cuts by the Reserve Bank of India (RBI), and middle-class income tax benefits', Dharmakirti Joshi, Chief Economist, Crisil, said in a note. At the sectoral level, the growth slowdown was broad based in every sector except in agriculture which grew at 4.6% in 2024-25 compared to 2.7% in 2023-24. The slowdown was the sharpest in manufacturing, where the growth rate fell from 12.3% in 2023-24 to just 4.5%. It is important to underline that part of the slowdown in manufacturing is driven by indexation (accounting for inflation) issues. This is borne out from the fact that nominal growth in manufacturing in 2023-24 (10.9%) was lower than real growth (minus inflation) and it has gone back to being higher than real growth (6.3%) in 2024-25. Services, which account for more than half of GVA grew at 7.2% in 2024-25 compared to 9% in 2023-24. Its private components, namely, Trade, Hotels, Transport, Communication & Services related to Broadcasting, and Financial, Real Estate & Professional Services lost momentum. Public Administration, Defence & Other Services saw a small uptick in growth. RBI's Monetary Policy Committee (MPC) has projected a GDP growth of 6.5% for 2025-26 in April, which was a 20-basis point downgrade from the projection made in February 2025 on account of increased downside risks from the global economy. 'Government retains its outlook on FY26 growth at 6.3-6.8%, with private consumption, especially the rural rebound, and resilient services exports as the key drivers,' Chief Economic Advisor V Anantha Nageswaran said while reacting to the GDP numbers. 'Multiple agencies project India's growth to be in the range of 6.3 – 6.7 per cent in FY26. Amidst global uncertainty, global growth for 2025 and 2026 is likely to slow,' he added.
Business Upturn
4 days ago
- Business
- Business Upturn
India's GDP grows 6.5% in FY25; Q4 growth accelerates to 7.4%
By News Desk Published on May 30, 2025, 16:09 IST India's economy maintained robust momentum in the fiscal year 2024-25, with real GDP growth estimated at 6.5%, according to provisional figures released by the National Statistical Office (NSO) on Thursday. In the January-March quarter (Q4), growth accelerated to 7.4%, reflecting broad-based strength across key sectors. Nominal GDP for FY25 grew by 9.8%, reaching ₹330.68 lakh crore, while real GDP stood at ₹187.97 lakh crore. In Q4, nominal GDP rose 10.8% year-on-year to ₹88.18 lakh crore, and real GDP was recorded at ₹51.35 lakh crore. Among sectors, construction led the expansion with 9.4% annual growth and a strong 10.8% rise in Q4. 'Public administration, defence & other services' grew 8.9% annually, while 'financial, real estate & professional services' registered a 7.2% increase. The primary sector, which had been subdued last year, bounced back with a 4.4% growth in FY25 and a sharp 5.0% increase in Q4, compared to just 0.8% in the same quarter last year. Private consumption also picked up pace, with Private Final Consumption Expenditure (PFCE) growing by 7.2% in FY25, compared to 5.6% in the previous year. Gross Fixed Capital Formation (GFCF), a proxy for investment, expanded 7.1% for the year and 9.4% in Q4. The latest data underscores the resilience of the Indian economy despite global uncertainties. The government will release GDP estimates for Q1 of FY26 on August 29, 2025. News desk at
India Today
4 days ago
- Business
- India Today
India GDP data to be released today: What should investors expect?
India's latest GDP numbers for the January–March quarter (Q4 FY25) and the full year 2024–25 will be released on Friday by the Ministry of Statistics. This data will give a clear picture of how the economy has performed in the past year, especially in the final this year, the National Statistical Office had estimated that India's economy would grow by 6.5% in 2024–25, with an expected growth of 7.6% in the March Reserve Bank of India, too, had projected a 6.5% growth rate for the full year during its April Monetary Policy Committee TO EXPECT FROM INDIA'S GDP DATA?According to a report from the State Bank of India, the Indian economy is expected to grow by 6.3% in 2024–25, with the March quarter showing growth between 6.4% and 6.5%. The report noted that India has stayed 'largely resilient' despite a weaker global economy and rising global tensions. It added that the country has managed to handle changing conditions a credit rating agency, believes that Q4 growth will be around 6.9%, while CareEdge expects it to be 6.8%. ICICI Bank and Union Bank of India have both projected a growth rate of 7% for the March quarter.A Reuters report, based on a poll of economists, suggested that India's GDP likely grew by 6.7% year-on-year in the March quarter. This would be higher than the 6.2% growth seen in the previous report stated that higher rural demand and more government spending helped the economy during the period. However, it also said that private companies were slow in making new investments because of global Manoranjan Sharma, Chief Economist at Infomerics Valuations and Ratings Ltd, said that the Indian economy continues to show strength.'India's economic trajectory remains resilient despite global headwinds and regional geopolitical tensions,' he said. He added that growth of 6.4% in FY25 and 6.5% in FY26 is being driven by strong domestic demand, steady government spending on infrastructure, and a slow but steady increase in private investment. He also pointed to a strong banking system, solid performance from the services sector, and improvements in manufacturing under the PLI scheme as positive release of the GDP figures comes just after India became the fourth-largest economy in the world, overtaking Japan. Only the United States, China, and Germany are now ahead of India. "Steadily improving macros like resilient GDP growth, down trending inflation and interest rates and declining fiscal and current account deficits lay the foundation for a strong economy and earnings recovery in the medium term. Investors should remain invested and buy quality stocks on dips," said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)Must Watch
