The decline in CPI inflation to 4.3% in Jan’25 from 6.2% in Oct’24 due to the seasonal decline in vegetable prices is extrapolated to predict a victory over inflation soon. However, the medium-to-long-term performance shows that RBI’s inflation-targeting objective is less convincing.

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Systematix Report

As the Indian economy is beset with an ennui of receding real household income, feeble demand, diminishing corporate profits and an imminent resurge of global protectionism, the recent policy prognosis is of a transient slowdown below the perceived 7%+ potential real GDP growth.

Amid the fiscal logjam, characterized by government spending cutbacks, a paltry concession of Rs 1 trillion in income tax incidence and the Reserve Bank of India’s acquiescence in initiating rate easing are seen as the necessary steroids. The anticipation is that India’s growth car will speed up again in a few quarters.

Are such expectations realistic? We think the likelihood of belied expectations loom as the central bank appears to be working with an outmoded compass amid a tempest.

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