India’s economic activity gained momentum in the second half of FY25, supported by strong domestic indicators, even as the rupee faced headwinds from global uncertainties, according to the latest Reserve Bank of India’s (RBI) Bulletin.
High-frequency indicators point to a sequential pickup in economic activity, with the Union Budget striking a balance between fiscal consolidation and growth.
Retail inflation eased to a five-month low in January, primarily due to a sharp decline in vegetable prices, offering relief to consumers.
Rupee under pressure amid FPI outflows
The rupee depreciated 1.5% month-on-month in January, tracking movements in major global currencies as the US dollar strengthened. The bulletin highlighted that FPI outflows from emerging market economies (EMEs) added further pressure on currencies, including the Indian rupee.
Despite heightened global market volatility, the rupee exhibited relatively low fluctuations compared to other emerging market currencies. However, in terms of the 40-currency real effective exchange rate (REER), the rupee depreciated by 2.2% in January, reflecting its weaker valuation against a basket of global currencies.
Also read: RBI cracks down on cooperative banks: Penalties, licence cancellations & amalgamations
The RBI Bulletin also noted that global financial markets remain on edge due to the slowing pace of disinflation and concerns over the impact of trade tariffs. Meanwhile, EMEs continue to experience capital outflows, driven by economic uncertainty and the stronger US dollar.
While India’s domestic economic momentum remains intact, currency pressures and external factors will be closely monitored in the coming months.
(Edited by : Shoma Bhattacharjee)
First Published: Feb 19, 2025 7:40 PM IST
