Economic Outlook.
Download ReportQuantEco Research || India Macrobook Dec-24
Q2 FY25 GDP growth disappointed sharply as it slipped to a 7-quarter low of 5.4%YoY from 6.7% in Q1.Keeping in mind H1 growth downside, hysteresis effect of the same and the evolving global dynamics, we revised lower our FY25 GDP growth forecast to 6.4% from 7.0% with downside risks.. We maintain our FY25 forecast of CPI inflation to 4.7% compared to 5.4% in FY24. The hump in inflation over Sep-Oct-24 could continue to keep the MPC on status quo on rates in Dec-24; with an actual pivot likely in Feb-25. However, the Dec-24 policy review could see the announcement of a 50 bps CRR cut, in a bid to sterilize RBI’s heavy FX intervention over the last two months, which has started to tighten money market spreads, and could be perceived as contrasting with the ‘neutral’ policy stance of the MPC. We maintain our 10Y g-sec yield forecast of 6.50% before end Mar-25 amidst a favorable outlook on g-sec supply-demand balance. Amidst weakness in foreign investment inflows, we have revised lower our FY25 BoP forecast to a surplus of USD 30 bn from USD 50 bn earlier. We also revise our above consensus USDINR call for end FY25 to 85.5 from 84.5 earlier.