Now Reading: HDFC Bank economist flags India growth resilience, warns of inflation risk
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HDFC Bank economist flags India growth resilience, warns of inflation risk
HDFC Bank economist flags India growth resilience, warns of inflation risk
India's economy remains resilient even as manufacturing activity weakens and cost pressures build, said Sakshi Gupta, Principal Economist at HDFC Bank, reacting to August PMI data. The services sector continues to expand…
India's economy remains resilient even as manufacturing activity weakens and cost pressures build, said Sakshi Gupta, Principal Economist at HDFC Bank, reacting to August PMI data. The services sector continues to expand strongly, offsetting sluggish factory output, but rising input costs pose a threat to margins and consumer prices.
Gupta cautioned that inflation risks are increasing, especially from food and commodity prices, which may keep the Reserve Bank of India from cutting rates soon. The RBI is expected to hold its repo rate at 6.5% in the upcoming policy review, with any easing dependent on a sustained decline in core inflation.
The August composite PMI held above 60, signalling strong expansion. However, the manufacturing PMI slipped to 57.5 from July's 58.1, while services PMI rose to 60.3. Gupta noted the divergence could widen if global demand weakens further, making the RBI's balancing act between growth and inflation more delicate.
Indian Opinion Analysis
India's Q2 GDP figures, due later this month, will show whether the service sector's strength can fully offset manufacturing's drag. The RBI's next monetary policy review in October will be influenced by August's inflation print, due mid-September. For now, the divergence raises a structural question: can services-led growth create enough jobs when factory output, which employs more lower-skilled labour, is slowing? The answer matters for lakhs of new entrants to the workforce each month. Watch the September 12 CPI data: if retail inflation stays above 5%, rate-cut expectations for early 2025 will fade further.
Source: cnbc.com
This story was synthesised by AI from the source linked above.
