A recent report by Bank of Baroda (BOB) claims that the Indian economy is progressing bly despite global economic uncertainties. According to the report, several indicators related to consumption and production in India have shown improvement in the first quarter of fiscal year 2025-26.
Growth in Steel, Electronics Imports, and Government Spending
The report highlights a significant increase in steel consumption during this quarter. Furthermore, there has been a surge in the import of electronics goods and central government spending. These figures are seen as indicators of b domestic demand and growth momentum in the country.
Service Sector Maintains Momentum
Figures like Service PMI, vehicle registrations, diesel consumption, tax collection by state governments, and e-way bills demonstrate that the service sector is also maintaining its pace. BOB believes that these indicators point towards the strength of domestic markets and the active participation of consumers.
Slight Sluggishness in the Two-Wheeler Sector
However, some slowdown has been observed in two-wheeler sales and the production of FMCG and durable goods. The report states that these sectors are currently experiencing some sluggishness due to inflation and demand volatility in urban areas. Despite this, the overall economic indicators remain positive.
Favorable Monsoon Brings Relief to the Agricultural Sector
As of July 9th, monsoon rainfall has been 15 percent above normal. This is expected to have a direct impact on agricultural production and rural demand. Good yields in the agricultural sector could inject new energy into the rural economy.
Strong Government Balance Sheet
The BOB report also indicates that the central government's fiscal deficit decreased to 4.5 percent in May, down from 4.6 percent in April. This reflects the government's efficiency in expenditure management and suggests that government policies are currently moving in the right direction.
Decline in Rupee Slows Down, Situation Improving
While the rupee depreciated by 1.3 percent in May, this decline reduced to only 0.2 percent in June. The rupee's position against the dollar is expected to strengthen further in July. This is attributed to the weakening of the dollar and a decrease in global tensions.
India-US Trade Agreement Expected to Strengthen Rupee
The report also mentions that a trade agreement between India and the United States could be finalized before August 1st. This is likely to further strengthen the Indian currency globally.
