MUMBAI, India, April 4, 2025 -- Dun & Bradstreet, a global leader in business decisioning data and analytics, has released its Economy Observer report for February 2025. Economy Observer is a monthly report sharing in-depth analysis of key macroeconomic developments in India and provides forecasts for key economic indicators, and insight into the expected direction of the Indian economy.
Key economic forecast:
Real Economy: India's economic growth picked up pace in Q3 FY25, rising to 6.2% from 5.6% in the previous quarter, fueled by strong rural demand and an 8.3% rise in government spending. Industrial activity also gained momentum, with IIP growth reaching 5.0% in January 2025, led by manufacturing and mining. Dun & Bradstreet forecasts IIP to rise to 6.3% in February 2025, supported by the Kumbh Mela and Holi driven consumer spending which significantly boosted the travel and hospitality industry, generating substantial revenue, creating numerous jobs and capital goods investment. The RBI's 25 bps rate cut to 6.25% in February 2025 is expected to aid growth, with a further cut expected in its April meeting. However, risks remain—U.S. reciprocal tariffs - set to take effect from April 2, could weigh on key exports like metals, chemicals, pharmaceuticals, and automobiles. Balancing domestic demand strength with external pressures will be key to sustaining growth momentum.
Price Scenario: In February 2025, India's price scenario showed encouraging signs for consumers as inflationary pressures eased. Retail inflation (CPI) dropped to a seven-month low of 3.6%, primarily due to a notable price decrease in key items like vegetables, eggs, meat, and fish. Dun and Bradstreet expects CPI inflation for March 2025 to be 3.5%, reflecting continued easing of food prices and stable fuel costs. Rural areas and urban regions experienced a similar trend, with headline inflation easing and food inflation dropping. On the wholesale front, WPI inflation saw a slight uptick to 2.4% in February 2025 from 2.3% in January 2025. Core inflation crossed 4% for the first time in 14 months, reaching 4.1%. Rural inflation remains higher than urban inflation, influenced by food price trends. Dun & Bradstreet forecasts that WPI inflation for March 2025 will remain at 2.4%, driven by a marginal increase in input costs and global commodity price fluctuations. Additionally, higher metal prices and concerns over tariffs are expected to contribute to inflation and growth in future.
Money & Finance: India's financial markets in March 2025 reflect a dynamic interplay between monetary policy actions, market demand, and liquidity conditions. Dun and Bradstreet forecasts the 10-year G-Sec yield moderating to 6.6%, 91-day Treasury Bill yield moderating to 6.4% from 6.5%, and bank credit growth slowing to 10.5% from 11%, reflecting a combination of easing inflation, stable borrowing, and cautious lending dynamics. The RBI's liquidity measures—OMO purchases, VVR auctions, and forex swaps—have improved liquidity, pushing short-term yields like the 91-day T-Bill lower. Easing inflation has strengthened expectations of future monetary easing. On the credit front, cautious lending by banks and businesses' wait-and-watch approach have slowed credit growth despite ongoing investments.
External Sector: In February 2025, the INR/USD exchange rate stood at 87.1. Dun & Bradstreet expects it to remain stable at 87.1 in March 2025 and slightly strengthen to 86.9 by April 2025, due to anticipated stabilization in global economic conditions and a potential easing of capital outflows. Additionally, the Reserve Bank of India's interventions in the currency market are expected to help maintain exchange rate stability, with the weakening of the dollar being a key factor for the rupee's strengthening. In mid-March, the trade deficit narrowed to USD13.8 billion, driven by a continued contraction in imports, particularly non-essential goods. In a positive development, Foreign Institutional Investors (FIIs) ended a month-long sell off in Indian stocks with a net inflow of USD 6.94 billion.
Arun Singh, Global Chief Economist, Dun & Bradstreet said, "India's growth remains robust, driven by strong rural demand, government spending, and a rebound in industrial activity. As April approaches, the focus will shift to sustaining this momentum amid global risks. Inflation has eased, with CPI dropping to a seven-month low, offering the RBI room for potential rate cuts, which could boost domestic demand. However, external risks loom, including potential U.S. tariffs on key exports like pharmaceuticals, railway equipment, and electrical machinery. Currency pressures and capital outflows also pose risks. Balancing global challenges with domestic resilience will be key to sustaining growth."
D&B's Economy Observer Forecast | |||
Variables | Forecast | Latest Period | Previous period |
IIP Growth | 6.3% Feb-25 | 5.0% Jan-25 | 3.2% Dec-24 |
Inflation WPI | 2.4% Mar-25 | 2.4% Jan-25 | 2.3% Jan-25 |
CPI (Combined) | 3.5% Mar-25 | 3.6% Feb-25 | 4.3% Jan-25 |
Exchange Rate (INR/USD)* | 86.9 Apr-25 | 87.1 Mar-25 | 87.1 Feb-25 |
91-day T-Bills* | 6.4% Mar-25 | 6.5% Feb-25 | 6.6% Jan-25 |
10-year G-Sec Yield* | 6.6% Mar-25 | 6.7% Feb-25 | 6.8% Jan-25 |
Bank Credit | 10.5% Mar-25 | 11% Feb-25 | 11.4% Jan-25 |
*Weekly Average ** Dun and Bradstreet Forecasts. | |||
About Dun & Bradstreet:
Dun & Bradstreet, a leading global provider of business decisioning data and analytics, enables companies around the world to improve their business performance. Dun & Bradstreet's Data Cloud fuels solutions and delivers insights that empower customers to accelerate revenue, lower cost, mitigate risk and transform their businesses. Since 1841, companies of every size have relied on Dun & Bradstreet to help them manage risk and reveal opportunity. For more information on Dun & Bradstreet, please visit www.dnb.com.
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