Economic Outlook

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Apr 26, 2024

QuantEco Research || India Macrobook April-24

Core ViewsQuantEco continues to expect FY25 GVA and GDP growth at 6.6% and 6.8% respectively. We believe activity momentum could see a moderation in FY25 on account of lagged impact of policy (fiscal, monetary, and regulatory) tightness and firming up of input price inflation vis-à-vis its deflationary state in FY24. Although, global demand conditions appear resilient for now, adverse spillover risks from ongoing geopolitical disturbances would need to be assessed. We main our forecast of CPI inflation at 4.5% in FY25 vs. 5.4% in FY24. We dial back our expectation of monetary policy easing from the RBI, and now look for the announcement of first rate cut of 25 bps in Oct-24, followed by another 25 bps cut in Feb-25. As we fine-tune our FY25 cumulative RBI rate cut expectation from 75 bps earlier to 50 bps now, we adjust our 10Y g-sec yield forecast upwards to 6.75% (before Mar-25) from 6.50% earlier. We maintain our FY25 call on the Indian rupee, with the currency likely to see an encore, i.e., mild depreciation coupled with low volatility. We continue to expect USDINR to move towards 84.5 levels by Mar-25.