Whether it is Trump's trade war or China's move?
Donald Trump's tariff threats have created a situation of trade war all over the world. Apart from this, foreign investors are withdrawing money from the indian stock market and turning to other markets including China. However, even after this, the country's growing economy will not be affected much. In fact, according to the latest monthly bulletin of RBI, India's economy will remain the world's fastest growing major economy even in 2025-26. Sustained growth momentum and strategic fiscal measures will play an important role in this.
What is in the report?
Citing the estimates of the international Monetary Fund (IMF) and the World Bank, RBI has said that India's GDP growth is expected to be between 6.5 percent and 6.7 percent in 2025-26. Despite global uncertainty, high-frequency indicators show that economic activity will improve in the second half of 2024-25, which will continue further.
Fiscal consolidation and capex growth
According to the RBI report, the Union Budget 2025-26 has struck a balance between fiscal consolidation and growth objectives. It has taken measures to boost household income and consumption while focusing on capital expenditure. The capex-to-GDP ratio is estimated to increase to 4.3 per cent in 2025-26, from 4.1 per cent in the revised estimates for 2024-25.
Inflation reduced, industrial activity improved
Retail inflation came down to 4.3 per cent in January, the lowest in the last five months. This decline is due to the sharp decline in vegetable prices due to the arrival of winter crops. At the same time, industrial activity has also seen improvement, which was reflected in the Purchasing Managers Index (PMI) of January. Indicators such as increase in tractor sales, increase in fuel consumption and steady growth in air passenger traffic show that economic momentum is recovering. According to the report, rural demand remains strong due to increased farm income. FMCG sales in rural areas grew 9.9 percent in Q3, up from 5.7 percent in Q2. Urban demand has also improved, where sales growth increased to 5 percent from 2.6 percent in the previous quarter.
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