Page 34 - The Indian EYE 062025

BUSINESS & TRADE JUNE 20, 2025 | The Indian Eye 34

India’s Economic Engine Gains Speed:

Low Inflation, Rate Cuts Fuel Optimism

With inflation easing to record lows and a proactive monetary policy in place, India’s economy

is poised for robust growth—bringing renewed confidence to consumers and businesses alike

OUR BUREAU
Mumbai

ndia’s economy appears to be
hitting a sweet spot. As inflation
Idips to its lowest level in over six
years and the Reserve Bank of India
(RBI) slashes interest rates to ener-
gize growth, a picture of strong mac-
roeconomic health is emerging. This
combination of low inflation and ac-
commodative monetary policy is lay-
ing the groundwork for an uptick in
consumer sentiment, real estate activ-
ity, and broader economic expansion.
According to the Ministry of
Statistics, retail inflation based on
the Consumer Price Index (CPI)
fell to 2.82% in May 2025, the low-
est since February 2019. The drop is
largely due to easing prices in food
categories like vegetables, pulses, ce-
reals, and eggs, alongside household
goods and sugar. Importantly, infla-
tion remains comfortably within the
RBI’s 2–6% tolerance range—a stark
contrast to price instability faced by On the external front, global oil prices and tariff policy uncertainty continue to cast a shadow, especially as the July 2025 deadline for new
many global peers. global trade terms approaches (ANI)
The inflation outlook for 2025–26
is equally promising, with projections Domnic Romell, President of CRE- report further supports this out- continue to cast a shadow, especial-
revised downward from 4% to 3.7%, DAI-MCHI, the apex real estate body. look, suggesting that retail inflation ly as the July 2025 deadline for new
and some analysts predicting an aver- “Lower interest rates on home loans in Q1 FY26 will undershoot RBI’s global trade terms approaches. Still,
age closer to 3%. Upasna Bhardwaj, will make homeownership more ac- own forecast of 2.9%, with June’s analysts believe weak global demand
Chief Economist at Kotak Mahindra cessible, especially in emerging cor- high-frequency price data continuing is likely to prevent any major com-
Bank, noted, “While the overall infla- ridors like Panvel and Dombivli.” to show a softening trend. modity price shock.
tion trajectory is expected to remain Consumer-facing sectors are Yet, the path forward is not In sum, India’s economic fun-
benign, recent policy actions suggest expected to be the biggest benefi- without watchpoints. Experts cau- damentals are showing resilience.
a prolonged pause unless fresh data ciaries. Real estate leaders like Gera tion that core inflation, while stable, Low inflation is giving consumers
demands further easing.” Developments and Star Housing Fi- could face upward pressure from breathing room, interest rate cuts
Indeed, that easing has al- nance believe the RBI’s move will increased government spending and are encouraging spending and invest-
ready begun. The RBI, in a bold significantly boost housing demand, rising rural demand. The prices of ment, and the central bank’s proac-
and growth-focused move, cut the especially in affordable and mid-in- key vegetables—tomato, onion, and tive stance is signaling stability and
repo rate by 50 basis points to 5.5% come segments. Kalpesh Dave, CEO potato—also remain a variable to growth readiness. As Aditi Nayar of
and reduced the Cash Reserve Ra- of Star Housing Finance, explained, watch, particularly if monsoon pat- ICRA summed up, “With inflation
tio (CRR) by 100 bps in early June. “Lower EMIs will leave more dispos- terns falter. likely to drop further in June and
These twin actions aim to inject li- able income in the hands of consum- “Disinflation driven by a high monetary policy aligned for growth,
quidity into the economy and lower ers, boosting overall spending and base and easing food prices creates India is well positioned to extend its
borrowing costs across the board. credit growth.” an ideal backdrop for growth,” said economic lead in a volatile global en-
It was the third rate cut of the year, Supporting this momentum is Sujan Hajra of Anand Rathi Group. vironment.”
bringing the cumulative reduction in the RBI’s confidence in the broad- “But the central bank must tread The coming quarters will test
the repo rate to 100 bps in 2025. er growth story. The central bank carefully, balancing inflation control how effectively these macro advan-
“This dual action of reducing forecasts real GDP growth of 6.5% with the need to support private in- tages translate into grassroots revival.
both the repo rate and CRR sends for FY26, signaling strong domestic vestment.” But for now, the signals are strong:
a clear signal—liquidity infusion fundamentals despite global uncer- On the external front, global oil India’s economy is not just stable—
and affordability are a priority,” said tainties. Bank of Baroda’s recent prices and tariff policy uncertainty it’s gaining momentum.

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