India’s Growth Momentum Picks Up In Q1 FY26 Amid Global Uncertainty, Inflation Tame: Bank Of Baroda Report

New Delhi: India’s economic growth remains on track amid global uncertainties, with an improvement in high frequency indicators for both services and manufacturing, and consumption picking up momentum during Q1 FY26 versus Q4 of FY25, according to a Bank of Baroda (BoB) report released on Friday.

High frequency data available for the first quarter (Q1) so far shows that consumption demand appears to be improving compared with the last quarter. This is reflective in the rise in steel consumption growth, increase in electronic imports, and higher central government revenue spending, the BoB report states.

Services indicators are also showing a pickup in activity, as can be seen in case of services PMI, vehicle registrations, diesel consumption, revenue collection of states and e-way bill generations.

However, some strains can be seen in performance of 2-wheeler sales, and moderation in consumer durables and FMCG output. However, domestic inflation remains in favour which hints at softer monetary policy which would spur growth, the report adds.

It also highlights that monsoon activity is healthy at 15 per cent above long period avaerage so far (as of July 9) which is expected to give a fillip to the agricultural sector.

The Central government finances are on a solid footing with the fiscal deficit ratio eased to 4.5 per cent as of May 2025 from 4.6 per cent as of April 2025, the report observes.

The report is also positive on the outlook for the rupee. It stated that the rupee depreciated marginally by 0.2 per cent in June after depreciating by 1.3 per cent in May. Easing geo-political tensions and a weaker dollar, led to range-bound trading in the domestic currency in the later part of the month.

“In July, the rupee is trading with an appreciating bias despite lingering concerns over US tariff policies. We expect this trend to continue. Investors remain hopeful of the successful completion of India-US trade deal before the August 1 deadline, which will lend further support to the rupee, the report said.

On the global front, tariff jitters are blindsiding growth-inflation dynamics. With fresh commodity specific and country-specific tariff rates being anticipated, inflationary concerns have again reignited. Recent Fed minutes also highlighted it as a hindrance to monetary policy easing. Based on the underlying murky global backdrop, domestic markets are likely to exhibit some degree of volatility, the report added.

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