The Indian economy holds steady into January, with robust industrial output, auto and services demand, and Centre’s fiscal consolidation on track. Inflation picks up from the recent lows – on a new base and partly driven by rising precious metal prices – but stays well within RBI’s target band, leaving repo rate on hold with an extended pause now the market consensus. Monetary transmission continues, with lending rates easing since February 2025 even as the credit-deposit ratio hits a record high. Externally, the rupee remains undervalued despite a weakening dollar, with multi-year low capital flows weighing on it. Large foreign exchange reserves provide a meaningful buffer. Record services exports partially offset a widening goods deficit.

Click the link to access the Annexure to NIIF’s Monthly Economic Report for February 2025.