Robust Economic Indicators in India; Rate Cuts May Enhance Growth: SBI Report
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Synopsis
New Delhi, March 16 (NationPress) India's economic indicators for February indicate a decrease in inflation, better industrial production, and solid corporate earnings, as per the latest SBI Ecowrap report. The analysis highlights potential rate cuts from the RBI that could stimulate further growth.
Key Takeaways
- Inflation moderation noted in February
- Industrial output shows strong growth
- Corporate profitability remains robust
- RBI rate cuts expected to support growth
- Positive outlook for capital expenditure
New Delhi, March 16 (NationPress) India’s economic indicators for February demonstrate a decrease in inflation, enhanced industrial production, and robust corporate profits, as highlighted in the latest SBI Ecowrap report.
While the short-term inflation trends appear positive, challenges such as imported inflation risks and rupee depreciation loom on the horizon.
The report notes that anticipated rate cuts by the RBI could significantly enhance growth, creating a favorable environment for capital expenditure expansion and industrial development. The shifting economic landscape indicates a cautious yet optimistic perspective for the upcoming months,” said the report released by the State Bank of India's Economic Research Department.
India's CPI inflation dropped to a seven-month low of 3.6 percent in February 2025, primarily due to a considerable reduction in food and beverage prices. The inflation for Food and Beverages decreased by 185 basis points (month-on-month) to 3.84 percent, largely driven by a steep decline in vegetable prices.
Vegetable CPI experienced a significant decline, entering negative territory (-1.07 percent) for the first time in 20 months, with approximately 80 percent of this reduction attributed to garlic, potatoes, and tomatoes.
The report forecasts CPI inflation to decline to 3.9 percent in Q4 FY25 and average 4.7 percent for FY25.
Inflation for FY26 is projected to range between 4.0-4.2 percent, while core inflation may lie between 4.2-4.4 percent.
The Reserve Bank of India (RBI) is expected to introduce successive rate cuts in April and August 2025, with an anticipated overall rate cut of at least 75 basis points. This trend may continue from October 2025, following a brief hiatus in August 2025.
India’s Index of Industrial Production (IIP) rose by 5.0 percent in January 2025, marking the highest growth in eight months, compared to 3.2 percent in December 2024.
The report states, “A robust balance sheet, favorable interest coverage, and a declining interest rate environment are expected to facilitate the next capital expenditure cycle for Indian industries.”
Improved corporate margins and liquidity conditions position Indian companies favorably for growth in capital expenditures, the report concluded.
