The latest analysis from SBI Research’s Ecowrap suggests a potential rate cut of 75 basis points for this fiscal year. As experts forecast, the Consumer Price Index (CPI) inflation is set to stabilize at 3.9% in the last quarter of FY25, averaging around 4.7% for the entire fiscal year. Looking ahead to FY26, inflation is projected to hover between 4.0% and 4.2%, with core inflation remaining slightly higher at 4.2% to 4.4%.

Anticipated Rate Cuts and Inflation Trends

Given these inflation trends, analysts predict a 75-basis-point reduction in interest rates, with anticipated cuts occurring in April and June 2025. Additionally, there is a possibility of another round of cuts in October 2025. According to the report, “With the current low inflation rates, we foresee a cumulative decrease of at least 75 basis points, with consecutive cuts expected in the upcoming policy meetings.”

CPI Inflation Decline

India’s CPI inflation has recently fallen to a seven-month low of 3.6% in February 2025, largely due to a significant decline in food prices. The inflation rate for food and beverages also eased to 3.84% as vegetable prices saw a notable drop. Interestingly, the inflation for vegetables turned negative for the first time in 20 months, driven by substantial price reductions in staples like garlic, potatoes, and tomatoes.

• Factors Affecting Prices:
  • Garlic consumption decreased due to the ongoing MahaKumbh festival.
  • Conversely, fruit prices surged due to increased demand during fasting periods.

Despite a slowdown in domestic inflation, imported inflation is on the rise, escalating from 1.3% in June 2024 to a striking 31.1% by February 2025. This surge is attributed to increased prices of precious metals, oils, and chemical products. The depreciation of the Indian rupee may also put additional pressure on inflation in the near future.

Industrial Production Growth

On a positive note, India’s industrial production (IIP) reported a robust growth of 5% in January 2025, up from 3.2% in December 2024. The manufacturing sector was a key contributor, growing by 5.5%, while mining experienced a 4.4% increase. However, the cumulative growth from April 2024 to January 2025 was recorded at 4.2%, which is a decline compared to the 6% growth seen during the same timeframe last year.

Corporate Sector Resilience

The Indian corporate sector has shown remarkable resilience amid economic fluctuations. Approximately 4,000 listed companies reported a 6.2% revenue increase in Q3 FY25, with EBITDA rising by 11% and profit after tax (PAT) increasing by 12% year-over-year. Key sectors such as Capital Goods, Consumer Durables, FMCG, Healthcare, and Pharmaceuticals have displayed strong growth trajectories.

Conclusion

With decreasing inflation, an anticipated interest rate cut, and impressive corporate performance, India’s economy appears poised for a stable trajectory. However, the rise in imported inflation and global economic uncertainties remain crucial factors to monitor closely in the coming months.

For more insights into economic trends and strategies, consider visiting SBI Research or explore related articles on inflation management and corporate growth.