SBI Predicts Resilient Economy Amid Inflation and Rate Cuts

SBI's EcoWrap forecasts a 75-basis point rate cut amidst an expected average inflation of 4.7% in FY25. Key factors include dropping CPI inflation, rising imported costs, and robust industrial and corporate performance. The economy balances stability and challenges from global uncertainties.

The State Bank of India's research publication EcoWrap forecasts a 75-basis point rate cut this fiscal year, with an anticipated average Consumer Price Index (CPI) inflation of 4.7% for FY25. Experts project inflation to stabilize at 3.9% in the fourth quarter of FY25, but anticipate it remaining in the range of 4% to 4.2% in FY26, with core inflation between 4.2% and 4.4%.

Analysts foresee at least a 75-basis-point rate reduction occurring in stages, beginning with consecutive cuts in April and June 2025, and potentially resuming in October. A drop in food prices, especially vegetables, contributed to February's CPI inflation reaching a seven-month low of 3.6%. The MahaKumbh festival decreased garlic demand, while fasting periods saw fruit prices rise.

Despite lower overall inflation, imported inflation surged to 31.1% in February 2025 due to precious metals and oil price spikes, compounded by rupee depreciation. Meanwhile, industrial production saw a 5% growth in January, led by a 5.5% increase in manufacturing. Corporate earnings also reflected resilience, with listed companies reporting notable revenue and profit increases.