Overview

• The central bank warns that persistent India–U.S. trade-policy uncertainty poses a downside risk to overall demand and exports.
• Headline inflation is expected to dip below 4% in the second quarter and average significantly below the target for the year.
• Rising real rural wages, a favorable monsoon for kharif, benign financial conditions, transmission of earlier rate cuts, fiscal support and improving household sentiment are seen sustaining domestic demand.
• Foreign portfolio investors turned net sellers in July and August, while steady domestic mutual fund inflows and an S&P sovereign rating upgrade helped cushion market impact.
• Recent data show subdued industrial activity alongside expanding manufacturing and sustained services growth, and monetary policy will remain closely guided by incoming evidence.