India 2025 Macro Outlook Report by JM Financial :Next month i.e. in February 2025, Reserve Bank of India (RBI) can start the rate cut cycle. This estimate has been expressed in a recent report of JM Financial. The report has given predictions on many important things related to India’s economic situation and prospects during the new year i.e. 2025, which includes important aspects like cut in interest rates, possible position of the rupee against the dollar and capital expenditure (Capex). . Along with this, the report has also focused on many issues related to balance of trade and fiscal consolidation.
The process of reducing interest rates will start in February 2025
According to the report of JM Financial, the Reserve Bank of India (RBI) may start cutting interest rates in February 2025. Initially this reduction will be minor and overall will be limited to the range of 50 to 75 basis points (bps). It has been estimated in the report that due to the high level of inflation and uncertainty in the global situation, this cut will not be much and while starting the rate cut, RBI will also have to pay attention to keeping the core inflation under control. In America too, the Federal Reserve will exercise similar caution and cut rates marginally.
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Rupee may remain between 85.5 to 87.5 against dollar
The rupee is likely to remain under pressure due to the strengthening of the US dollar and increase in India’s trade deficit. In view of the limited possibility of interference in the foreign exchange market from India’s side, the possibility of further decline in the rupee has also been expressed. The report estimates that the rupee will be between 85.5 to 87.5 per dollar in 2025. The dollar has strengthened in recent months. This has affected the currencies of emerging markets. The policies of the new government in America under the leadership of the next President Trump are likely to have an impact on the entire world as well as India.
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Trade deficit likely to increase
The report states that India’s trade deficit will increase in 2025 due to slowdown in exports and increase in imports. This deficit was $37 billion in November 2024, which is much higher than the monthly average of $23.5 billion. Current Account Deficit in the financial year 2024-25CAD) can range from 1.5% to 1.6% of the gross domestic product (GDP). This deficit will affect India’s foreign exchange reserves and the stability of the rupee.
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Chances of reduction in capital expenditure
Capital expenditure (Capex) in 2025 is likely to be 10% less than the budget target. The report says that this decrease could be due to the election year and efforts to control the fiscal deficit. Along with this, the government can present more attractive allocations in the budget for the financial year 2025-26. But its full impact will be seen only later.
Fiscal consolidation and impact on bond yields
The report estimates that the central government will continue to move towards its set goal of fiscal consolidation. Fiscal deficit target of 4.5% will be easily achieved in the financial year 2025-26. This will help bond yields remain stable between 6.2% to 6.8%. According to the report, the government will also try to reduce its debt-GDP ratio (Debt as % of GDP).
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Impact of American policies on India
The report has described the possible tariff policies of US President-elect Donald Trump as a significant challenge for Indian trade and market. Trump’s policies may mainly focus on China, but they may also impact India’s export market. The report also suggests that India may have to take decisive steps to increase domestic demand and protect the export market.
What are the important projections for 2025?
Many important things have come to light in this report of JM Financial:
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A slight reduction in interest rates may start from February 2025.
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The value of rupee can remain between 85.5 to 87.5 per dollar.
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Current account deficit (CAD) is likely to be between 1.5% to 1.6%.
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The effect of reduction in capital expenditure and fiscal consolidation will be visible.
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Bond yields will also remain stable between 6.2% to 6.8%.
The report expresses hope that the year 2025 will prove to be important for India from the economic point of view. During this period, apart from the domestic situation, the international situation will also have a deep impact on the Indian economy. Aspects like stability of the rupee, current account deficit and cut in interest rates will shape the economic scenario of 2025.
