Market Pulse News

India Ratings and Research (Ind-Ra) has said that the Reserve Bank of India’s (RBI's) monetary policy committee (MPC) is expected cut benchmark interest rate by 25 basis points in its policy review meeting next month to push growth. It said ‘We expect the headline inflation in FY25 to cool off to 4.7 per cent. Monetary easing may be limited to 75 bps in FY26’. However, if the impact of US reciprocal tariff turns out to be higher than expected, there may be higher easing by RBI. The RBI's monetary policy committee is scheduled to meet 6 times in the next fiscal 2025-26 beginning April 1. The first meeting is slated for April 7-9.

Ind-Ra said higher and stubborn inflation had prompted the RBI to tighten the monetary policy, and it raised the policy rate by 250 bps between May 2022 and February 2023, reaching 6.5 per cent. In February 2025, the repo rate was cut by 25 bps to 6.25 per cent. It expects the headline retail inflation in March quarter of FY25 to fall below 4 per cent, after a gap of 21 quarters. It expects RBI to go in for maximum three rate cuts in FY26, aggregating to 75 bps. 

It said ‘These along with one rate cut in February 2025 would translate in a 100bps cut in the current policy easing with the terminal repo rate at 5.5 per cent and average inflation at around 4 per cent, which would translate in a real repo rate of 1.5 per cent in FY26’. It added the February 2025 MPC minutes suggest that the RBI is cognizant of slowing growth momentum. This suggests that while the low and stable inflation is the prime target of the RBI, the growth support through monetary policy will increasingly be a focus area of monetary policy.

The Monthly Economic Review by the Department of Economic Affairs (DEA), Ministry of Finance has said that the Indian economy is estimated to achieve a growth of 6.5 per cent in FY25 despite considerable external headwinds. The Monthly Economic Review added that the performance of the economy in the past quarters was driven by strong agricultural and service sector performance on the supply side and a steady increase in consumption and core merchandise and services exports on the demand side. The DEF said ‘Geopolitical tensions, trade policy uncertainties, volatility in international commodity prices and financial market uncertainties pose considerable risks to the economic growth outlook, globally and locally. One offsetting positive is the outlook for commodity prices. Domestic private sector capital formation, focused on India’s solid fundamentals and economic prospects, will be an important driver of economic growth in FY26’. The review document added that all sectors are estimated to grow close to their trend rates.

The monthly review added retail inflation eased to 3.6 per cent in February 2025 on the back of recent benign price trends of food items. Food inflation saw a sharp decline, driven by winter season correction in vegetable prices, continued easing of pulse prices and various administrative measures of the government. The DEA added that the estimates of agricultural production suggest a positive outlook for food inflation. The review said in the near full-year data available for FY25, there is a close convergence of actual deficits, critical ratios, and essential expenditures with their budget estimates, indicating a sustained commitment to fiscal targets.

However, the Monthly Economic Review recognised that global trade continues to be affected by uncertainty in the policy environment. The Global Trade Policy Uncertainty Index rose to a record high of 237.4 in Q4 2024. Tariff-related developments in multiple countries have heightened trade-related risks, affecting investment and trade flows globally, the DEF added in the monthly review. Consequently, India’s exports have Supportive fiscal measures, accommodative monetary policy, and the Union Budget’s focus on longer-term development drivers and reform will bolster domestic economic resilience amidst significant global uncertainties.

Minister of State for Commerce and Industry Jitin Prasada has said that India and the US would focus on increasing market access, reducing import duty and non-tariff barriers, and enhancing supply chain integration in the proposed bilateral trade agreement. He said that as on date, reciprocal tariffs have not been applied by the US on India. He said that the government continues to engage with the US to achieve enhancement and broadening of bilateral trade ties in a mutually beneficial and fair manner.

Prasada said ‘Both countries plan to negotiate a mutually beneficial, multi-sector Bilateral Trade Agreement. Both countries would focus on increasing market access, reducing tariff and non-tariff barriers, enhancing supply chain integration and resolving bilateral trade issues’. The US has issued the Memorandum on Reciprocal Trade and Tariffs on February 13, wherein the Secretary of Commerce and US Trade Representative are to take necessary actions to investigate harm to America from any non-reciprocal trade agreements adopted by trading partners and provide a report with detailed proposed remedies for each trading partner, based on which, US action against relevant country could, thereafter be undertaken.

Regarding tariffs on agri products, the minister said that as per WTO 2023, India’s simple average tariff rate is 17 per cent, with simple average agricultural tariff (which includes textiles) being 39 per cent and for industrial goods 13.5 per cent for 2023. Post Union Budget 2025-26, the simple average industrial tariff has reduced to 10.66 per cent. Top 10 commodities of India’s export to the US in 2023-24 are drug formulations, biologicals ($8 billion); pearl, precious, semiprecious stones pearl, precious, semi-precious stones ($6.57 billion); petroleum products ($5.83 billion); telecom instruments ($5.82 billion); gold and other precious metal jewellery ($3.3 billion); iron and steel products ($2.78 billion); ready-made garments of cotton including accessories ($2.74 billion); electronic components ($2.69 billion); cotton fabrics, made ups etc. ($2.61 billion); and marine products ($2.5 billion).

The International Monetary Fund (IMF) in its latest report has said that the Indian financial system has become more resilient and diverse, driven by rapid economic growth and withstood the pandemic well. The Financial Sector Assessment Program (FSAP), a joint programme of the IMF and the World Bank (WB), undertakes a comprehensive and in-depth analysis of a country's financial sector. IMF has released the latest India-FSSA report, based on the assessment carried out during 2024, while WB's Financial Sector Assessment (FSA) report is due for publication.

The IMF report said that since the last FSAP in 2017, India's financial system has become more resilient and diverse, driven by rapid economic growth. It said ‘The system recovered from the distress episodes of the 2010s and withstood the pandemic well. NBFIs and market financing have grown, making the financial system more diverse and interconnected. State-owned financial institutions' share remains significant’. It further said that stress tests show that the main lending sectors are broadly resilient to macrofinancial shocks, despite some weak tails. Banks and NBFCs have sufficient aggregate capital to support moderate lending even in severe macro-financial scenarios.

The report said ‘But several banks, particularly PSBs, may need to strengthen their capital base to support lending in such situations. Weak tails comprise a few non-systemic NBFCs and urban cooperative banks (UCBs) that report below minimum or negative capital even in the baseline. Vulnerability to short-term liquidity stress is generally contained’. On regulation and supervision of NBFCs, the IMF acknowledged India's systematic approach to prudential requirements of NBFCs with the scale-based regulatory framework. IMF appreciated India's approach to the introduction of a bank-like Liquidity Coverage Ratio (LCR) for large NBFCs. IMF also acknowledged that the regulatory framework in securities markets has been enhanced in line with international practice to manage and prevent emerging risks. Notable improvements include establishing the Corporate Debt Market Development Fund (CDMDF). 

The report observed that India's insurance sector is strong and growing, with a significant presence in both life and general insurance. The sector has remained stable, supported by better regulations and digital innovations. IMF also analysed cyber security frameworks in the banking sector, financial market infrastructure (FMI), critical information systems, and other relevant players in the securities market. It found that Indian authorities have advanced cybersecurity risk oversight, especially for banks. However, it stated that extensive cybersecurity crisis simulations and stress tests for banks could be expanded for cross-sectoral and market-wide events to further strengthen cybersecurity resilience.

Economic think tank - the Global Trade Research Initiative (GTRI) has said that the amendments in the customs rules to tighten checks on goods imported under free trade agreements (FTAs) could make it harder for businesses to do imports at concessional duties and may increase compliance cost. However, it said the move would curb the misuse of FTAs as India has seen repeated instances where goods originating from non-FTA countries, such as China, were rerouted through FTA member countries like Vietnam or Singapore to exploit preferential duty benefits.

On March 18, the Ministry of Finance issued a notification, introducing amendments to the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR). The amendment replaces the term, ‘Certificate of Origin’ (CoO), with a broader term, ‘Proof of Origin’, across various rules and forms under the CAROTAR framework. GTRI Founder Ajay Srivastava said ‘This change comes in conflict with the several existing FTAs with ASEAN etc where certificate of origin issued by the exporting country is the accepted document, and added the move could make it harder for businesses to do concessional tariff imports.

Srivastava said electronics, white goods, and auto components often shipped through ASEAN (Association of SouthEast Asian Nations) countries are likely to face heightened scrutiny. GTRI has urged the government to publish a detailed framework outlining what qualifies as acceptable proof of origin, and to provide redress mechanisms for importers facing unjustified denials of preferential tariff claims. It said that now importers would have to ensure access to comprehensive supporting documents that establish the origin of the goods, which is not always feasible, especially when exporters are reluctant to share sensitive trade data like raw material invoices or production costs.

It said ‘The compliance burden will increase, as there is no strict definition of what constitutes adequate proof. If not satisfied, Customs can deny preferential tariffs, effectively imposing full duties and penalties’. It added that importers may also be compelled to share sensitive commercial information, which not only raises privacy and confidentiality concerns, but may also subject them to arbitrary or inconsistent treatment.

Commerce and Industry Minister Piyush Goyal has said that India's services exports are registering healthy growth rates and the sector should aspire to reach $450 billion in exports, overtaking merchandise shipments, in the next financial year. He added the goods trade is facing headwinds in the current global situation. He said the services sector should be targeting $450 billion in exports in 2025-26 and about $385-390 billion this fiscal.

In 2023-24, the services exports stood at $341 billion, an increase of 4.85 per cent over the previous year. In April-February 2024-25, the services exports increased 14.1 per cent to $354.9 billion. On the other hand, goods exports contracted 3.1 per cent year-on-year to $437 billion in 2023-24. This year in April-February, the goods exports were up 0.06 per cent at $395.6 billion.

The minister also said that achieving 15-18 per cent growth in services exports is feasible as newer technologies get introduced and a greater number of Global Capability Centres (GCCs) of multinational companies open up in the country. He said at last count the number of GCCs operating in India hit 1,650. He said that while information technology and information technology-enabled services account for $200 billion of total services exports, other growth areas for services like tourism, accounting and financial services are coming back in a big way.

However, he said the IT and ITeS will have to remain at the forefront. He said because of the learnings during Covid while delivering services remotely, the complaints over the non-availability of enough H1B visas are hardly heard. The minister said he would still prefer that more and more services be delivered from remote locations and not from client locations as it would add to the competitiveness of the services by reducing costs. Another benefit of delivery from home would be that salaries are paid in India. Taxes on salaries will also be collected in India and will boost the economy.

The RBI March Bulletin has said that India’s sound fiscal policies, a well-calibrated monetary framework, and digital transformation initiatives are expected to provide a strong foundation for long-term sustainable economic growth. It also said that macroeconomic fundamentals remain strong, and economic growth is poised to sustain momentum driven by robust domestic demand, steady investment activity, and ongoing policy-driven infrastructure development along with a pick-up in government spending.

An article on ‘State of the Economy’ published in the Bulletin noted that the resilience of the global economy is being tested by escalating trade tensions and a heightened wave of uncertainty around the scope, timing, and intensity of tariffs. While engendering heightened volatility in global financial markets, these have also caused apprehensions about the slowdown in global growth. It said ‘Amidst these challenges, the Indian economy continues to demonstrate resilience as evident in the robust performance of the agriculture sector and improving consumption’. It added the reverberations of a tumultuous external environment, however, are being reflected in sustained foreign portfolio outflows.

The article further said high frequency indicators suggest that aggregate demand continued to remain resilient in Q4:2024-25. Activity indicators such as E-way bills and toll collections recorded double digit (y-o-y) growth in February 2025. Also, high frequency food price data for March so far (up to 17th) show an increase in cereal prices, both for rice and wheat. Edible oil prices have firmed up as well – mainly driven by palm, soybean and sunflower oil. Pulses prices, on the other hand, continued to show broad-based moderation. Prices of key vegetables including potato, onion and tomato witnessed further correction.

According to the article, India’s financial landscape is also navigating these external risks manifested through various channels while addressing domestic funding needs. It said ‘The Reserve Bank has remained agile, swiftly tackling liquidity shortages triggered by government tax flow dynamics,currency leakages and foreign portfolio investor (FPI) outflows’. The RBI has deployed a strategic mix of interventions, including open market operations (OMO), daily variable rate repo (VRR) auctions, and dollar/rupee buy-sell swap auctions. These proactive measures have helped stabilise market liquidity conditions, ensuring financial resilience in an unpredictable global environment. The RBI said the views expressed in the Bulletin article are of the authors and do not represent the views of the Reserve Bank of India.

Commerce Minister Piyush Goyal has said that India and New Zealand are working to finalize a comprehensive and mutually beneficial Free Trade Agreement (FTA). The two countries had announced the launch of negotiations for an FTA earlier this week. Goyal emphasized the immense potential for collaboration between the two countries. He articulated an ambitious vision for the India-New Zealand partnership, targeting 10x growth in bilateral trade over the next decade. He called on business leaders from both countries to contribute towards achieving this goal.

Discussing global challenges, Goyal emphasized the importance of trusted partnerships. He said ‘The world is going through a lot of problems. A defining partnership between our two nations can serve as a model for how trusted partners work together. It’s not about the size of an economy; it’s about collaboration and shared values’. He noted that India’s economy, currently at $4 trillion, is poised to grow to $30-35 trillion in the next 22-25 years, presenting immense opportunities for collaboration. He highlighted the role of tourism in fostering stronger relations between India and New Zealand.

Prime Minister of New Zealand said that businesses play a critical role in both economies and in strengthening bilateral relations. The Prime Minister further emphasized the need to explore new frontiers and sectors where New Zealand holds a competitive advantage. He added ‘I feel incredibly optimistic about the future of both India and New Zealand. India for us is a game changer. As a smaller country in the world, India is a really consequential relationship for us. We all recognize that there is a lot more that these two countries should be doing together. When we look at the trading relationship today at $3 billion, there’s a huge opportunity for us here’.

The government data has showed that net direct tax collection grew 13.13 per cent to over Rs 21.26 lakh crore so far (till March 16, 2025) this fiscal aided by higher advance tax mop up. During the year, the government collected Rs 10.44 lakh crore from four instalments of advance tax as against Rs 9.11 lakh crore in the previous fiscal, registering a growth of 14.62 per cent. The last instalment of the advance tax payment was due on March 15, 2025, for the current financial year.

Advance tax collection under the corporate tax category rose by 12.54 per cent to Rs 7.57 lakh crore while non-corporates witnessed a growth rate of 20.47 per cent to Rs 2.87 lakh crore during the financial year. An individual whose estimated tax liability is likely to be over Rs 10,000 (after considering tax deducted and collected at source - TDS and TCS) is required to pay advance tax that year, as per Section 208 of the Income-Tax Act. This includes salaried taxpayers. Advance tax is to be paid before the end of the financial year on the income that one would have earned that year. Advance tax is paid in four instalments - June 15, September 15, December 15, and March 15 of the financial year.

As per the data released by the Central Board of Direct Taxes (CBDT), mop up from net non-corporate taxes, which include mainly personal income tax, grew 17 per cent year-on-year to about Rs 11.01 lakh crore. However, net corporate tax collection rose in single digits at 7 per cent to Rs 9.69 lakh crore between April 1, 2024, and March 16, 2025. Net collections from securities transaction tax (STT) surged nearly 56 per cent to Rs 53,095 crore so far this fiscal. Refunds worth more than Rs 4.60 lakh crore were issued during the period as against Rs 3.47 lakh crore in the year-ago period.

Gross direct tax mop up till March 16 grew 16.15 per cent to more than Rs 25.86 lakh crore. In the revised estimates (RE) for the current fiscal, the government has pegged income tax collections at Rs 12.57 lakh crore, up from the budget estimate of Rs 11.87 lakh crore. The collection from STT is pegged at Rs 55,000 crore in this fiscal in RE, higher than the budget estimate (BE) of Rs 37,000 crore. The corporate tax collection target was revised lower at Rs 9.80 lakh crore, down from the budget target of Rs 10.20 lakh crore. In total, the RE pegs direct tax collections at Rs 22.37 lakh crore, higher from Rs 22.07 lakh crore in BE.

The rating agency Crisil in its latest report has said that India’s merchandise trade deficit will be under pressure in the fiscal year 2026, as domestic private consumption is expected to remain strong, maintaining imports up. According to the rating agency, India’s exports could also come under pressure due to the slowing economy and tariff related conditions in the United States. However, as per the report, the service trade, which has proven to be more resilient and where India runs a surplus, will provide some cushion.

The report said ‘Slowing global growth (3.0 per cent in calendar 2025 from 3.3 per cent in calendar 2024, as per S&P Global’s November 2024 forecast) - particularly of the US (2.0 per cent vs. 2.7 per cent), our largest export destination - could hit India’s exports’. As per the report, the global trade volume growth is also expected to moderate to 3.2 per cent in calendar 2025 from 3.4 per cent in calendar 2024 according to the United Nations, which could impact the overall trade.

The report highlights that since India imposes higher tariffs and has a trade surplus, it would impact the country. It also highlighted that the risks to global trade have risen due to the ongoing tariff war initiated by the US. It added ‘India is vulnerable to US tariff actions as it runs a trade surplus with the country and taxes imports from there at a higher weighted average tariff rate (9.5 per cent) than Washington’s taxes on imports from India (3 per cent)’.

According to the Crisil Intelligence, India’s real gross domestic product (GDP) growth would be steady at 6.5 per cent in fiscal 2026 despite uncertainties stemming from geopolitical turns and trade-related issues led by US tariff actions. This forecast for India’s economy depends on two key factors. The rating agency anticipates that normal monsoon and commodity prices will continue to remain soft, which will keep the food prices stable.