India is poised to remain the world’s fastest-growing major economy this year, analysts have said, with a recent jumbo rate cut by its central bank expected to boost consumption and investment, even as the country contends with fresh military tensions with Pakistan and an uncertain global trade environment.
The Reserve Bank of India (RBI) last week delivered a larger-than-expected interest rate cut of 50 basis points and reduced the cash reserve ratio – the minimum amount of capital banks must park with the central bank – by one percentage point. The move is projected to inject about US$29.15 billion into the banking system by year-end.
The surprise monetary easing followed robust economic performance, with gross domestic product expanding 7.4 per cent in the January to March quarter – an acceleration that helped prompt the RBI’s pre-emptive push to sustain growth.
“It looks unlikely that India will be able to maintain the 7.4 per cent growth, but it should be able to record a growth of 6.5–7 per cent in this financial year [ending March 2026],” Sujan Hajra, chief economist and executive director at the Anand Rathi group, told This Week in Asia.
India is set to overtake Japan as the world’s fourth-largest economy by the end of this calendar year, according to projections by the International Monetary Fund. The impact of India’s tensions with Pakistan and volatile global environment was likely to be offset by the central bank’s monetary easing, Hajra said.
