India's economic indicators for February reflect a moderation in inflation, improved industrial output and strong corporate earnings

While inflation trends remain favourable in the short term, imported inflation risks and rupee depreciation pose challenges going forward.

New Delhi, March 16 India’s economic indicators for February indicate a moderation in inflation, improved industrial output and strong corporate earnings, according to the latest SBI Ecowrap report.

While inflation trends remain favourable in the short term, the report highlights the risks of imported inflation and rupee depreciation on the macroeconomic outlook.

“The RBI’s expected rate cuts could further bolster growth, providing a positive environment for capex expansion and industrial performance. The evolving economic landscape suggests a cautious but optimistic outlook for the coming months,” said the report published by the State Bank of India's Economic Research Department.

India's CPI inflation fell to a 7-month low of 3.6 per cent in February 2025 due to a substantial decline in food and beverage prices. Food and Beverages inflation eased by 185 basis points (on-month) to 3.84 per cent, mainly due to a sharp decline in vegetable prices.

Vegetable CPI declined sharply, entering negative territory (1.07 per cent) for the first time in 20 months. Approximately 80 per cent of this decline was attributed to garlic, potatoes and tomatoes.

CPI inflation is expected to decline to 3.9 per cent in Q4 FY25 and average 4.7 per cent for FY25, the report projected.

FY26 inflation is projected in the range of 4.0-4.2 per cent, while core inflation may range between 4.2-4.4 per cent.

The Reserve Bank of India (RBI) may implement successive rate cuts in April and August 2025, with an overall expected cumulative rate cut of at least 75 basis points. The cycle of rate cuts may continue from October 2025, following an intervening gap in August 2025, it added.

India’s Index of Industrial Production (IIP) expanded by 5.0 per cent in January 2025, the highest in eight months, compared to 3.2 per cent in December 2024.

“The combination of a strong balance sheet, comfortable interest coverage, and a downward interest rate cycle is expected to support the next capex cycle for Indian industries,” said the report.

Improved corporate margins and liquidity conditions make Indian Inc. well-positioned for capital expenditure growth, it added.