India’s economic growth continues to remain on track despite global uncertainties, supported by improvements in key high-frequency indicators in both the services and manufacturing sectors, according to a report by Bank of Baroda released on Friday.
The report notes that consumption has gained momentum in the first quarter (Q1) of FY26 compared to the previous quarter. Higher steel consumption, a rise in electronic imports, and increased central government revenue expenditure have contributed to the uptick in demand.
Services sector activity also showed signs of improvement, as reflected in robust services PMI figures, higher vehicle registrations, increased diesel consumption, stronger revenue collections by states, and growth in e-way bill generation.
However, the report flagged some concerns regarding the performance of 2-wheeler sales and a slight moderation in consumer durables and FMCG output. Domestic inflation trends remain favourable, which could allow for a softer monetary policy stance and further boost growth.
The report also highlighted healthy monsoon progress so far, with rainfall about 15 per cent above the long-period average as of July 9, which is expected to support the agricultural sector.
On the fiscal front, the report said the Central government’s finances remain strong, with the fiscal deficit narrowing to 4.5 per cent of GDP as of May 2025, compared to 4.6 per cent in April 2025.
The rupee outlook also remains positive. After depreciating by 1.3 per cent in May, the rupee weakened marginally by 0.2 per cent in June and traded in a narrow range towards the end of the month, helped by easing geo-political tensions and a softer US dollar.
“In July, the rupee is trading with an appreciating bias despite lingering concerns over US tariff policies. This trend is likely to continue with investors hopeful about the timely conclusion of the India-US trade deal before the August 1 deadline,” the report said.
Globally, the report observed that fresh tariffs and related policy uncertainty are clouding the outlook for growth and inflation. The US Federal Reserve’s minutes indicate that these concerns could limit the scope for monetary policy easing, which may add to market volatility in the coming months.
-IANS