However, while overall inflation eased, core inflation—considered a more stable measure—rose to 4.08%, the highest in 14 months. Analysts point to a combination of factors, including elevated fruit prices during the Maha Kumbh festival, which saw a surge in demand. Similarly, imported inflation has become a growing concern, spiking from 1.3% in mid-2024 to 31.1% in early 2025, fueled by rising global prices of precious metals, oils, and fats.
Industrial activity also gained momentum, with India’s Index of Industrial Production (IIP) registering 5% growth in January 2025. The manufacturing and mining sectors led the charge, along with robust performances in consumer durables and intermediate goods. Despite this, the non-durable goods segment remained weak, reflecting subdued demand.
India’s central bank, the Reserve Bank of India (RBI), is expected to cut interest rates by at least 75 basis points in 2025, beginning with reductions in April and August. This anticipated monetary easing, coupled with strong corporate earnings, signals optimism for India’s next capital expenditure cycle. Companies reported revenue growth of 6.2%, with profit after tax jumping 12% in the latest quarter, underscoring improving margins and financial stability.
While the outlook remains cautiously optimistic, challenges such as imported inflation and rural-urban inflation disparities persist. States like Kerala and Chhattisgarh recorded the highest inflation rates, whereas Telangana and Delhi enjoyed the lowest. The SBI Ecowrap report concludes that India is well-positioned for steady growth, provided global pressures remain manageable.
