India's Economy at Crossroads: Upcoming Budget and RBI Meeting to Define Future Path

The next ten days are crucial for India's economic future. The Union Budget on February 1 and RBI's Monetary Policy Meeting on February 7 will outline strategies to tackle India's slowing growth. Both fiscal consolidation and stimulus measures are anticipated to play significant roles in upcoming policies.

India stands at an economic crossroads as the Union Budget announcement on February 1 and the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) meeting on February 7 loom on the horizon. These pivotal events are expected to chart the course for revitalizing the country's slowing economy, as highlighted in a recent Union Bank of India (UBI) report.

The report outlines the Indian economy's deceleration, noting a growth rate decline from over 8 percent in fiscal 2024 to 5.4 percent in the current fiscal's July-September quarter. Amid this slowdown, the government is anticipated to prioritize fiscal consolidation, aiming to tighten the fiscal deficit target to 4.5 percent of GDP by FY26 from 4.8 percent in FY25.

Expectations are high for stimulus measures in the budget to counter weak demand and boost private capital expenditure (capex). The report forecasts a possible 50 basis point rate cut by the RBI, initiating a gradual easing cycle to stimulate demand. Yet concerns linger over public spending quality and fiscal pressures, particularly in the wake of delays and subsidy burdens.

(With inputs from agencies.)