India Economy Check: Inflation, IIP and Mutual Fund Trends
Why in the news
Fresh data on industry, prices and mutual funds gave India a mixed outlook: a sturdy real economy but jittery financial markets.
Key facts
| Indicator | Reading |
|---|---|
| Retail inflation, Feb 2025 | 3.61% (seven-month low) |
| Food inflation | 3.75%, lowest in nearly two years; was 10.87% in Oct 2024 |
| Industrial production, Jan 2025 | 5% (eight-month high); Dec was 3.55% |
| Mutual fund inflows, Feb | Down 27% |
| New SIPs | 44.6 lakh, FY 2025 low |
| Repo rate | Cut 6.50% to 6.25% on 7 Feb |
- Cooler prices back the 6.5% GDP growth goal for FY 2025 and bring the RBI’s 4% target within reach.
- IIP growth came from primary, intermediate, infrastructure and construction goods.
- Stock returns have fallen for four straight months, making retail investors cautious.
RBI response
- The liquidity crunch of ₹1.7 trillion followed foreign investor outflows.
- RBI held two dollar/rupee swap auctions and planned a third, expected to add over ₹2 trillion.
- The repo cut aims to lift capital flows and activity.
Way forward
- Real economy signals stability; market volatility looks temporary.
- RBI interventions aim to restore investor confidence.
Exam angle
- First repo cut in five years: 7 February 2025.
- Repo: 6.25% after the cut.
- SIP = Systematic Investment Plan.