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The Reserve Bank of India (RBI) is expected to grapple with a classic trilemma of managing growth, inflation, and currency stability, all while navigating a precarious global economic landscape.
Inflation, which remains above the RBI’s target range, is expected to keep interest rates elevated throughout the first half of 2025, potentially curbing private consumption and investment.
With inflationary risks intensifying, particularly due to a depreciating rupee, the central bank is likely to maintain a tight monetary stance. The report notes that any easing of monetary policy is unlikely before April 2025.
Furthermore, the rupee’s expected depreciation against the US dollar could exacerbate inflation by increasing the cost of imports, adding further strain on the economy.
Budget 2025: India has less than ₹1 lakh crore to stimulate the economy
The Union Budget for the financial year ending March 2026 is seen as a ray of hope to prioritise fiscal consolidation, while maintaining measures to support economic growth.
Despite these challenges, India continues to be one of the fastest-growing major economies.
However, Moody’s cautioned that moderating domestic demand, combined with external pressures, could make 2025 a particularly difficult year for policymakers.
