Daijiworld Media Network - New Delhi
New Delhi, Oct 31: The Reserve Bank of India (RBI), which raised policy rates by 25 basis points for the first time in nearly four years and shifted its stance from neutral to calibrated tightening, is expected to take pre-emptive action, with a cumulative hike of 50-75 basis points in the current tightening cycle, a report said on Saturday.
The glut in system liquidity has been absorbed through the RBI’s measures, and the central bank is expected to raise rates in its next policy review, according to a report by Bank of Baroda.
Consumption in September presented a strong overall picture, reflected in high-frequency indicators such as non-oil and non-gold imports, electronic imports and automobile sales, amid festive-season demand.
“Growing momentum in power demand, along with higher steel consumption and growth in the personal loans segment, further supports the uptick in economic activity. However, there are some concerns, as noted in deteriorating consumer confidence (RBI) in both urban and rural sectors,” the report noted.
On the agricultural front, the Southwest monsoon this year was 13 per cent below the long-period average (LPA), amid prevailing El Nino conditions. Consequently, the increase in kharif crop output was lower, while reservoir levels also remained subdued, potentially affecting rabi sowing.
The report said the Centre’s fiscal deficit ratio on a trailing 12-month moving average basis eased to 4.4 per cent in September, compared with 5.1 per cent in September 2025.
During the first half of FY27 (April-September), net revenue growth rose by 3.6 per cent, following a 4.5 per cent increase in the corresponding period of FY26. The moderation was driven by indirect tax collections, which declined by 4.9 per cent, against a 2.6 per cent increase in the first half of FY26.
Direct tax collections, however, performed better, growing by 13.1 per cent compared with 3.1 per cent in the corresponding period last year.
On the expenditure front, overall spending maintained momentum, rising by 10.7 per cent against 9.1 per cent in the first half of FY26. This was driven by revenue expenditure, which surged by 10 per cent compared with an increase of 1.5 per cent in the corresponding period last year.