Inflation and Economic Projections for FY25 and FY26 In its latest “State of the Economy” report, the Reserve Bank of India (RBI) suggests that headline retail inflation could align with the 4% target by the second half of FY25 and potentially reach target levels by FY26. As of April 2024, the year-on-year inflation rate slightly decreased to 4.8%, with food inflation slightly rising to 7.9%. The RBI forecasts an average CPI inflation of 4.5% for FY25, with quarterly variations.
Net FDI Records Significant Drop The report highlights a dramatic 62.17% reduction in Net Foreign Direct Investment (FDI) to India, totaling only USD 10.58 billion in FY24, the lowest since 2007. This decrease is attributed to increased capital repatriation and overseas investments by Indians. Despite global challenges like rising borrowing costs and geopolitical tensions, India remains a strong contender for FDI, particularly from countries like Singapore, Mauritius, and the USA.
Record Highs in Outward Remittances India’s Liberalized Remittance Scheme (LRS) recorded a new high with USD 31.73 billion in FY24, a 16.91% increase from the previous year. This growth was fueled primarily by expenditures on international travel and remittances for maintenance and education abroad.
Surge in NRI Deposit Flows NRI deposit inflows surged by 63.5% to USD 14.7 billion in FY24, marking the highest in eight years. This significant increase was predominantly in Foreign Currency Non-Resident (FCNR) accounts, with substantial growth also in Non-Resident External (NRE) and Non-Resident Ordinary (NRO) deposits.
Recent Regulatory Actions The RBI has taken notable regulatory actions, including imposing business restrictions on Bengaluru’s National Co-operative Bank due to its declining financial health and cancelling the license of United India Co-operative Bank in Nagina, Uttar Pradesh, due to insufficient capital and earning prospects.
These insights from the RBI’s report provide a comprehensive overview of the current economic trends and regulatory interventions shaping India’s financial landscape.
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