Low inflation to help economy and households

New Delhi

India is likely to benefit from low inflation for the rest of 2025, says a new HSBC Research report. This will improve the buying power of families and reduce costs for companies. It may also help India’s government manage its finances better.

The report expects inflation to stay around 2.5% for the next six months. Food prices should remain steady due to strong food stocks and a good monsoon. Lower global commodity prices and a stronger rupee are expected to keep core inflation low. India is also benefiting from falling prices in China.

The report includes updates on 100 economic indicators across different sectors. In the March quarter, 66% of these indicators showed growth. Informal sector consumption increased, driven by government spending, a good winter crop, higher rural wages, and better trade conditions in rural areas. However, urban spending on goods like electronics remained weak.

There are some challenges in meeting the fiscal deficit goal for 2025–26 due to slow tax growth and higher defence spending. But there is relief from the Reserve Bank of India’s higher dividend payout of Rs 2.7 trillion. The government might also raise fuel taxes instead of cutting pump prices to improve revenue.

If half of the savings from lower oil prices are used this way, the fiscal deficit target could still be met, and extra funds may be available for development.

In April, early data showed continued growth, with 64% of indicators doing well. Informal sector demand rose further, supported by stronger domestic sales, the report said.