Mumbai: India’s economic outlook is showing signs of improvement, attracting foreign institutional investors (FIIs) to Indian equities. Since March 20, FIIs have invested USD 3.8 billion in the Indian stock market, sensing the potential for growth. Key indicators, such as above-average reservoir levels, rising rural wages, and decreasing tax rates, have strengthened both urban and rural economies.
Economic Growth and Inflation Show Improvement
India's GDP growth for Q3 FY25 stood at 6.2 per cent, up from 5.6 per cent in Q2 FY25. Furthermore, food inflation has dropped sharply, reaching 3.8 per cent in February. The Reserve Bank of India (RBI) is expected to continue its policy easing, with a predicted 25 basis points cut in the repo rate during its upcoming meeting in April. Additionally, the central government’s capital expenditure (capex) growth has also accelerated in December and January, leading to a more optimistic outlook for FY26.
Rural Economy to Benefit from Favorable Conditions
The rural economy is poised to benefit in 2025, with good monsoons and favorable reservoir levels. Current reservoir levels are higher than the long-term average, promoting confidence among farmers and encouraging higher crop sowing. This should lead to increased rural incomes, supported further by rising agricultural and non-agricultural wages.
Government Tax Cuts to Stimulate Urban Spending
The recent income tax cuts announced in the Union Budget, totaling Rs 1 lakh crore, are expected to boost urban discretionary spending, putting more money in the hands of the urban population.
