Indian Economic Outlook and Monetary Policy for 2025

This report presents an analysis of India's economic outlook and the anticipated monetary policy adjustments for 2025. It forecasts a moderate slowdown in India's economy, projecting growth to decrease from 6.3% in 2024 to 6.1% in 2025, primarily due to tight monetary and fiscal policies and a sluggish manufacturing sector. The Reserve Bank of India (RBI) is expected to implement two interest rate cuts of 25 basis points in February and June, influenced by easing food price pressures and the need to support economic activity. However, risks associated with recent rupee depreciation and potential policy shifts from the new US administration may delay these cuts. The report discusses the RBI's neutral policy stance and the internal debates regarding the strength of the economy, highlighting the divergence between the RBI's optimistic forecasts and the more conservative projections. It also examines the impact of external factors, including trade tensions and currency volatility, on India's economic landscape.