Mumbai, February 20 (NationPress) Recent high-frequency indicators suggest a notable recovery in India's economic activity during the latter half of 2024-25, a trend expected to continue, as highlighted in the latest RBI monthly bulletin.

In a challenging global landscape, the Indian economy is set to maintain its status as the fastest-growing major economy in 2025-26, with IMF and World Bank projecting GDP growth rates of 6.5% and 6.7%, respectively.

The report indicates that the Union Budget for 2025-26 effectively balances fiscal prudence with growth objectives by maintaining a strong focus on capital expenditure (Capex) while also implementing measures to enhance household incomes and consumption.

The capital expenditure to GDP ratio is slated to rise to 4.3% in 2025-26 from 4.1% in the revised estimate for 2024-25.

In January, retail inflation dropped to a five-month low of 4.3%, primarily due to a significant decrease in vegetable prices linked to the influx of winter crops, as reported.

High-frequency indicators indicate that the economy is recovering in H2:2024-25 following a slowdown in H1.

Industrial activity has improved compared to the previous quarter, as evidenced by the Purchasing Managers’ Index (PMI) in January.

Growth in tractor sales, increased fuel consumption, and sustained air passenger traffic are all signs of a broader recovery, according to the bulletin.

The report also emphasizes that rural demand remains strong, bolstered by rising farm incomes.

In rural regions, sales of Fast-Moving Consumer Goods (FMCG) increased by 9.9% in Q3:2024-25, significantly higher than 5.7% in Q2. Urban demand also rebounded with 5% growth in Q3, nearly double the 2.6% growth of the prior quarter.

Enterprise surveys conducted by the Reserve Bank support this positive outlook, revealing that listed non-government, non-financial companies experienced a surge in sales growth during Q3.

Sequentially, operating profit margins have also improved, aligning with enhanced sales growth, as noted in the report.

Investment plans from the private sector remained steady, with the total value of projects approved by banks and financial institutions nearing ₹1 lakh crore in Q3:2024-25.

Furthermore, External Commercial Borrowings (ECBs) and Initial Public Offerings (IPOs) for capital expenditure purposes saw an increase in Q3.

Ongoing uncertainty in global trade and geopolitical factors has impacted domestic equity markets, leading to declines in both benchmark and broader markets due to selling pressures from Foreign Portfolio Investors (FPIs) amid weak sentiment.

The Indian rupee has depreciated, consistent with trends in other emerging economies, largely due to the strength of the US dollar.

Robust macroeconomic fundamentals, coupled with improvements in various metrics of external sector resilience, have enabled India to navigate the current wave of global uncertainty, the RBI bulletin indicates.

The bulletin also notes that uncertainty surrounding US trade policy has surged to levels reminiscent of the 2019 US-China trade war, suggesting that restrictive trade policies may lead to long-term shifts in global trade patterns rather than just transient disruptions, along with upward pressures on consumer and business expenses.

The global economy is continuing to grow at a steady yet moderate rate, with varying outlooks across different nations amid rapidly changing political and technological landscapes.

Financial markets remain cautious due to the slowing pace of disinflation and potential tariff impacts.

Emerging market economies are facing selling pressures from FPIs and currency depreciation driven by a robust US dollar, the bulletin concluded.