Delilah D’Souza

Daijiworld Media Network- New Delhi

New Delhi, May 26: A promising outlook for the Indian economy is taking shape as HSBC Research forecasts stable and low inflation for the remainder of 2025—fueling optimism for both household consumption and corporate health. In its latest report, HSBC states that the moderation in inflation is set to boost real purchasing power for consumers while lowering input costs for businesses, offering a dual advantage that could lift growth momentum.

The financial major expects headline inflation to average around 2.5% over the next six months, thanks to well-stocked food reserves and expectations of a favourable monsoon, which will help tame food prices. A stronger rupee, easing global commodity prices, and economic disinflation from China are cited as key reasons for the contained core inflation.

“Inflation’s calm phase opens doors for growth—without putting pressure on policy levers,” the report stated, as HSBC updated its India economic indicators dashboard, comprising 100 key metrics across various sectors.

While the report flags some fiscal risks—including sluggish nominal GDP growth, lower-than-expected direct tax revenues, and rising defence costs—it emphasizes that these pressures are likely to be balanced by stronger-than-budgeted dividends from the RBI, pegged at ?2.7 lakh crore.

HSBC also identifies a critical buffer: falling global oil prices. If the government decides to retain part of the savings through higher excise duties rather than lowering pump prices, it could not only bridge the fiscal gap but also fund additional growth initiatives.

“If the government captures just half of the oil price bounty, it can meet its fiscal deficit target and create a surplus for capital expenditure,” the report noted.

India’s economy showed renewed strength in Q1 FY25 (January-March 2025), with 66% of tracked indicators registering positive growth—up from 64% in the previous quarter. This resurgence was largely powered by informal sector demand, driven by:

• Increased state capital expenditure
• A strong winter harvest
• Higher rural wages
• Improved rural terms of trade

However, urban consumption was more muted, with consumer durables and imports lagging behind.

Early signs from April 2025 are also encouraging. About 64% of high-frequency indicators remain in positive territory, with non-cess GST collections suggesting further strengthening of informal sector consumption.

With inflation cooling and growth indicators turning green, HSBC’s analysis hints at a favourable economic runway for India in the second half of 2025. However, the balancing act between fiscal prudence and growth spending will be key.

As India navigates geopolitical uncertainties and domestic policy challenges, the HSBC report offers a cautious yet reassuring narrative—one where macro stability could be the foundation for sustained economic momentum in the year ahead.