The Reserve Bank of India went to the newspapers announcing the cutting interest rates after five years. This thus raises the user’s speculation whether the RBI will further cut down rates. However, inflation figures in the recent month increased, as inflation fell to 4.3% in January, the lowest in five months. As per the report of the NCAER, this reduction in inflation creates further scope for the RBI to consider more rate cuts.
Earlier this month, the RBI reduced the repo rate by 0.25% to 6.25% now. The April meeting of the Monetary Policy Committee (MPC) is going to be an interesting one for the interest rates decisions.
Positive Signals for Indian Economy
There are some signs which indicate that even with the global economy being under pressures, the Indian economy managed to be much stronger in few fronts:
- The PMI Manufacturing index showed a robust growth record at 57.7 in January.
- The Services PMI also holds well at 56.5 indicating a vibrant services space.
- GST collections continue to show healthy increases with gross collections for January 2025 rising 12.3 percent and net collections growing at 10.9 percent, compared with the previous values of 7.3 percent and 3.3 percent in December 2024.
- Sales of electric and non-electric vehicles in India have grown rapidly, reflecting increasing consumer confidence.
Effects on Agriculture and Inflation
According to Poonam Gupta, Director General of NCAER, falling prices are freeing up further scope for maneuver by economic policy-in-the-round changes, with signs of resilience evident in agriculture, which could help prevent runaway inflation and enhance the rural economy.
Concerns about Foreign Investment
However, this is a counterpoint put under the positive news headlines. The exodus of Foreign Institutional Investors from the Indian market is growing. According to her, foreign investment is influenced by various global factors. Currently, the outflow of foreign investors is common, not only in India but across many developing nations.