Most indicators of real economic activity highlight loss of momentum in Q2 FY25 on domestic idiosyncratic factors and soft global demand. While domestic urban consumption is losing momentum, rural consumption is poised for a pick-up. Factors to watch: (i) the festive season for cues on domestic consumption demand and (ii) US presidential elections and geopolitical tensions in the Middle East, for trade outlook. We maintain our FY25 GDP growth forecast of 7.0%, but acknowledge a gradual build-up of a downward bias. We revise up our FY25 forecast of CPI inflation to 4.7% from 4.5% earlier on account of persistence of food price shocks. Although the RBI has shifted the monetary policy stance to ‘neutral’ from ‘withdrawal of accommodation’, we expect an actual monetary policy pivot to manifest in Q4FY25. As such, we now shift our first rate cut call to Feb-25 from Dec-24 earlier. We maintain our 10Y g-sec yield forecast of 6.50% before end Mar-25 amidst a favorable outlook on g-sec supply-demand. 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.
Download ReportQuantEco Research || India Macrobook Oct-24
Most indicators of real economic activity highlight loss of momentum in Q2 FY25 on domestic idiosyncratic factors and soft global demand. While domestic urban consumption is losing momentum, rural consumption is poised for a pick-up. Factors to watch: (i) the festive season for cues on domestic consumption demand and (ii) US presidential elections and geopolitical tensions in the Middle East, for trade outlook. We maintain our FY25 GDP growth forecast of 7.0%, but acknowledge a gradual build-up of a downward bias. We revise up our FY25 forecast of CPI inflation to 4.7% from 4.5% earlier on account of persistence of food price shocks. Although the RBI has shifted the monetary policy stance to ‘neutral’ from ‘withdrawal of accommodation’, we expect an actual monetary policy pivot to manifest in Q4FY25. As such, we now shift our first rate cut call to Feb-25 from Dec-24 earlier. We maintain our 10Y g-sec yield forecast of 6.50% before end Mar-25 amidst a favorable outlook on g-sec supply-demand. 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.