High frequency indicators point to economic recovery: RBI

MUMBAI: The RBI’s State of the Economy report said high-frequency indicators point to a sequential pick-up in economic activity in second half (Oct-March) of 2024-25, with momentum expected to continue. However, financial markets remain uncertain due to slowing pace of disinflation, potential tariff impacts, and selling pressures on emerging market economies from foreign portfolio investors, amid currency depreciation driven by a strong US dollar.
The report highlights India’s economic recovery and resilience amid global uncertainties, including US trade policy. “The US trade policy uncertainty has spiked to levels last seen during the 2019 US-China trade war. Restrictive trade policies and fragmentation could lead to a long-term shift in global trade patterns rather than a short-term disruption, pushing up consumer and business costs,” it said.
The Purchasing Managers’ Index shows improvement in industrial activity, while higher tractor sales and fuel consumption indicate rising demand. Increased air passenger traffic and growth in FMCG sales further support the recovery. RBI’s enterprise surveys and the performance of listed non-govt non-financial companies, with accelerating sales growth and improving profit margins, reinforce the positive trend.
The report suggests India will remain the fastest-growing major economy in 2025-26, with high-frequency indicators pointing to a sustained recovery in the second half of 2024-25. Retail inflation moderated to a five-month low in Jan 2025, mainly due to lower vegetable prices.