High frequency indicators, like automobiles gross sales, air visitors, metal consumption and GST E-way payments, point in the direction of a sequential pickup in momentum of economic exercise in the course of the second half of the fiscal 2024-25 and maintain transferring ahead, RBI Bulletin mentioned on Wednesday (February 19, 2025).
However, a robust greenback, pushed by US economic resilience and commerce coverage pivots, might exacerbate capital outflows from rising economies, push danger premiums increased, and intensify exterior vulnerabilities, mentioned an article on ‘State of the Economy’ revealed in RBI’s February bulletin.
Economic exercise momentum is poised to be sustained, sturdy rural demand is anticipated to obtain an additional fillip from the strong efficiency of the agriculture sector. Urban demand can be poised for a restoration, monitoring decline in inflation in addition to a lift to disposable incomes from the sizeable earnings tax reduction introduced in the Union Budget 2025-26.
“…high frequency indicators point towards a sequential pick-up in momentum of economic activity during H2:2024-25, which is likely to sustain moving forward,” it mentioned.
The economic exercise index (EAI) is constructed by extracting the widespread development underlying 27 excessive frequency indicators of economic exercise utilizing a Dynamic Factor Model.
It additionally famous that the worldwide financial system continues to develop at a gradual however reasonable tempo, with divergent outlook throughout international locations amid quickly evolving political and technological landscapes.
Financial markets stay on edge on the slowing tempo of disinflation and the potential influence of tariffs. Emerging market economies (EMEs) are witnessing promoting pressures from international portfolio traders (FPIs) and forex depreciation engendered by a robust US greenback, the article mentioned.
The central financial institution mentioned the views expressed in the article are of the authors and don’t signify the views of the Reserve Bank of India.
The authors additional mentioned the price range measures to gas 4 engines of development – agriculture, MSMEs, funding and exports – are anticipated to spice up medium-term development prospects of the Indian financial system.
“The Union Budget prudently balances fiscal consolidation and growth objectives by continued focus on capex alongside measures to support consumption while providing a clear roadmap for debt consolidation,” the article mentioned.
Further, home demand can be anticipated to profit from the repo price reduce by the Monetary Policy Committee (MPC) in its assembly on February 7, 2025.
The article additionally mentioned there was a rise in the share of public sector banks (PSBs) in quantity of transactions (from remitter financial institution facet) throughout January 2025 as in comparison with the degrees recorded a 12 months in the past.
The variety of technical declines per 10,000 UPI transactions lowered throughout most financial institution classes in January 2025 in comparison with January 2024, reflecting enhanced effectivity of banks’ programs regardless of increased transaction volumes.
A rising US greenback and FPI outflows from EMEs amidst rising international uncertainties exerted important stress on EME currencies throughout January 2025.
The Indian rupee (INR) depreciated by 1.5% (m-o-m) in January, in line with actions in most main currencies.
“In an environment of heightened global market turbulence, the INR exhibited relatively low volatility,” the article mentioned.
FPI flows turned adverse in January 2025, reflecting heightened international uncertainties. Net FPI outflows value $6.7 billion have been recorded with fairness outflows of USD 8.4 billion amidst rising risk-off sentiments amongst traders.
Gross inward international direct funding (FDI) rose by 20.6 per cent (y-o-y) to USD 62.5 billion throughout April-December 2024.
Published – February 19, 2025 10:42 pm IST
