The Reserve Bank of India (RBI) on Friday cut the repo rate by 25 basis points to 6.25 percent, marking the first reduction in five years. The central bank also projected GDP growth for fiscal year 2026 at 6.7 percent and inflation to come down to 4.2 percent in FY26 from 4.8 percent in FY25. The RBI said the global economic backdrop remains challenging but the Indian economy continues to remain strong and resilient.
'Militarily, it risks escalating tensions with Pakistan, potentially triggering conflict due to Pakistan's heavy reliance on the Indus.'
Skymet expects a good monsoon over western and southern India.
Recent documents by NITI Aayog and periodic labour force surveys on employment show that the importance of agriculture is rising in the Indian economy.
The FMCG industry hopes for a revival in consumption growth in 2025 with some 'green shoots' already visible, after having a challenging year amid escalating input costs and a double-digit rise in food inflation, which ultimately slowed down the pace of the urban market growth in the second half of 2024. Soaring prices of commodities such as palm oil, coffee, cocoa and wheat forced FMCG players to go for a hike of 3 to 5 per cent or resort to shrinkflation by reducing pack sizes and grammage to retain attractive price points, fearing a volume loss.
Geopolitical tensions, trade policy uncertainties, volatility in international commodity prices and financial market uncertainties pose considerable risks to India's economic growth in the coming year, the finance ministry cautioned on Wednesday. "Global trade continues to be affected by uncertainty in the policy environment... tariff-related developments in multiple countries have heightened trade-related risks, affecting investment and trade flows globally.
Amid a debate on the basis of a monetary policy stance, one may be curious enough to know how non-food retail inflation has behaved over the years in India. Let the eager souls catch a glimpse of facts. In the past 10 years, non-food inflation came down below 4 per cent on two occasions - pre-Covid period of 2019-20 and now in the first four months of the current financial year (FY25).
Leading FMCG companies reported a decline in margins in the September quarter on account of higher input costs and food inflation, which ultimately slowed down the pace of urban consumption. Rising prices of commodity inputs such as palm oil, coffee and cocoa were also accentuated and some FMCG firms have hinted at a price hike. HUL, Godrej Consumer Products Ltd (GCPL), Marico, ITC, and Tata Consumer Products Ltd (TCPL) have expressed concerns over squeezing urban consumption, which according to industry experts forms 65-68 per cent of FMCG total sales.
'A repo cut will be very good for the market as it will mean that everything is being done to spur growth in these uncertain times.'
Retail inflation slowed to a four-month low of 5.22 per cent in December compared to 5.48 pc in November, mainly due to easing of prices in food basket, according to government data released on Monday. The inflation based on Consumer Price Index (CPI) was 5.48 per cent in November and 5.69 per cent in December 2023.
Domestic rating agency ICRA on Monday said Indian companies are likely to clock 7-8 per cent revenue growth during the March quarter of the current fiscal year, led by revival in rural demand and uptick in government spending. ICRA expects the private capital expenditure (capex) cycle to remain measured in view of the uncertainties around geopolitical developments and relatively subdued outlook on merchandise exports from India.
Reserve Bank of India (RBI) Governor Sanjay Malhotra said the repo rate cut in the February meeting of the monetary policy committee (MPC) was due to inflation aligning with the target and recognising the fact that monetary policy is forward-looking.
The RBI on Wednesday slashed key interest rate by 25 basis points, for the second time in a row, to support a shuttering economy hit by reciprocal tariffs imposed by the US. Following the rate cut, the key policy rate eased to 6 per cent providing relief to home, auto and corporate loan borrowers.
This is the third consecutive week when food inflation has shown an upward trend.
The wholesale price-based food inflation rose to 17.94 per cent in the last week of January from 17.56 per cent in the previous week. Potato prices jumped 40.57 per cent over the last year, while pulses became dearer by 41.24 per cent.
In the second week of December, the food inflation was at 18.65 per cent. Potato prices more than doubled while pulses became costly by over 41 per cent over the last year.
With concern on food inflation ebbing with the monsoon progressing well, the Reserve Bank of India (RBI) is warming up to the idea of a change in stance to "neutral" from "withdrawal of accommodation", according to economists. In his speech on Thursday during the annual event of the Federation of Indian Chambers of Commerce and Industry-Indian Banks' Association, RBI Governor Shaktikanta Das said: "The balance between inflation and growth is well-poised."
Deputy Governor Michael Patra warned about the spillover effects of food inflation.
Sanjay Malhotra takes charge as the 26th RBI governor at a time when headline retail inflation has shot up to 6.2%.
The need for a manufacturing policy, reining in food inflation and raising investment in the country were among key suggestions given by economists who met Finance Minister Nirmala Sitharaman and senior ministry officials in the first round of pre-Budget consultations on Friday.
The Reserve Bank is unlikely to ease the benchmark policy rate during 2024 given the uncertainty over food inflation, State Bank of India (SBI) chairman C S Setty has said. The US Federal Reserve's first cut in interest rates in more than four years is expected soon, triggering central banks in other economies to follow suit. "On the rate front, a lot of central banks are taking independent calls.
It was almost 23 per cent during the second week of June, 2010.
India's economy is projected to grow between 6.3 per cent and 6.8 per cent in FY26, according to the Economic Survey 2024-25, tabled in Parliament on Friday. The survey highlights that the country's economic fundamentals remain strong, supported by a stable external account, fiscal consolidation, and private consumption. It noted that the government plans to strengthen long-term industrial growth by focusing on research and development (R&D), micro, small, and medium enterprises (MSMEs), and capital goods.
Wholesale price based inflation declined to a 3-month low of 1.89 per cent in November on cheaper food items, and experts predicted a 0.25 per cent interest rate cut by the RBI in the policy review in February. The Wholesale Price Index (WPI) based inflation was 2.36 per cent in October 2024. It was 0.39 per cent in November, last year. In August, 2024, it was 1.25 per cent.
Food inflation, as measured by the Wholesale Price Index, stood at 11.81 per cent in the previous week ended October 29.
Wholesale inflation fell to a 3-month low of 2.04 per cent in July on decline in prices of food items especially vegetables, government data released on Wednesday showed. The decline in wholesale price index (WPI) based inflation in July came after it rose for four months in a row till June, when it was 3.36 per cent. It was (-) 1.23 per cent in July last year. In April wholesale inflation stood at 1.19 per cent.
Dr Nagesh Kumar, one of the three new MPC members, wanted the MPC to reduce the repo rate by 25 basis points to 6.25%.
The Reserve Bank of India on Thursday decided to keep the policy rate unchanged for the ninth time in a row, saying food inflation remains stubborn. The rate increase cycle was paused in April last year after six consecutive rate hikes, aggregating to 250 basis points since May 2022.
'As the Budget has taken some measures to spur growth, similar action from the MPC may be expected.'
RBI watchers are going to be on tenterhooks for the next 3 weeks.
The rate of price rise in food items stood at 17.14 per cent in the corresponding week of 2010.
Food inflation in the previous week was 8.76 per cent.
Food inflation rose to 9.46 per cent for the week ended December 4 on account of higher prices of rice, vegetables, milk and fruits. Food inflation stood at 8.60 per cent in the previous week.
Food inflation declined to a three-month low of 10.15 per cent for the week ended November 13 as vegetable prices softened on fresh crop arrival, raising hopes that the Reserve Bank will not hike key rates for now.
The annual rate of price rise of food items in the previous week was 16.74 per cent. Week-on-week, prices of fruits and vegetables fell by six per cent and tea became cheaper by two per cent during the week under review.
With prices of essential items rising and fears of food inflation spreading to manufactured goods, the overall inflation for March, data for which is expected next week, is likely to cross the double digit mark.
This is the second week in a row that food inflation has increased, after easing for three successive weeks.
Since March 2020, WPI food inflation rate continued to fall but the CPI-food inflation rose, signaling a breakdown in supply chain from the mandis to the final household.
'Inflation is not good for industry. Nor for the economy as a whole.'
Food inflation, as measured by Wholesale Price Index, stood at 10.60 per cent in the previous week.
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