On the monetary easing path

The Monetary Policy Committee (MPC) meeting this month comes against the backdrop of a relatively more stable global environment compared to the previous policy as countries attempt to strike trade deals with the US, with the country's administration willing to provide flexibility in terms of timings and tariff rates.

- UPASNA BHARDWAJ

Having said that, the global outlook remains delicate as policy uncertainty and trade frictions continue.

While the adversities on the global front may have eased lately, the high-frequency indicators in India remain mixed. Data on auto sales, infrastructure sector, steel, cement, core exports, index of industrial production, etc., suggest an early weakening trend, while travel/freight indicators appear to be robust. The tariff-led uncertainty is further expected to delay a revival in the private capex cycle. On the other hand, we expect a normal monsoon, higher rural wages, lower inflation and cost of borrowing, along with a partial impact of income tax cuts to provide some cushion to the consumption demand.

Overall, we expect the FY26 GDP estimates to be around 6-6.2% as the global risks unfold. Notably, the fiscal headroom to address softness in growth remains limited. The Reserve Bank of India's (RBI) higher-than-budgeted dividend to the government along with higher revenues led by excise duty hike are expected to offset the downside risks on direct tax collections.