India’s economy is set to grow faster than expected – the Reserve Bank of India (RBI) now expects growth of 7.3% in the fiscal year 2025‑26, up from its earlier 6.8% forecast. At the same time, it lowered the inflation outlook to 2%.
The economy grew 8.2% in the second quarter of this year – the fastest pace in six quarters. The growth was driven mainly by consumer spending and higher investment.
Headline CPI inflation rose slightly to 0.7% in November, but it remains well below the RBI’s upper tolerance limit. Core inflation stayed steady at 4.3%, while core‑excluding‑gold‑and‑silver fell to 2.4%.
In December, the RBI cut the policy repo rate by 25 basis points, bringing it to 5.25%, to keep growth supported while inflation stays under control.
Higher growth expectations could lift earnings expectations for Indian companies, especially those linked to consumer spending and domestic services. However, watch for any sudden changes in export demand or global risk sentiment that could affect market sentiment.
The RBI’s upbeat growth outlook signals confidence in India’s domestic demand, while a lower inflation forecast offers room for continued monetary support. The economy’s resilience is promising, but investors should stay alert to external trade and global market developments.
Remember, this is a perspective, not a prediction. Do your own research and consider your risk tolerance before making any investment decisions.
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