GDP flexes, RBI frets
India's GDP growth rate beats estimates even as RBI chases dollars.
In what was a heavy news day for the economy, the Reserve Bank of India held the repo rate at 5.25% and India clocked a GDP growth rate of 7.8% in a war-marred quarter. But the bigger story was RBI’s coordinated push with the government to attract foreign capital and steady a battered rupee.
Faced with a weakening rupee, rising crude and a worsening global economy, the central bank cut its GDP growth forecast for FY27 to 6.6% from 6.9% and raised its inflation estimate to 5.1%. Yet, policymakers resisted calls for a rate hike, signalling they would rather tackle currency pressures through capital inflows than higher borrowing costs.
To that end, the RBI and government unveiled a sweeping package of measures. Foreign investors will get wider access to government bonds, tax exemptions on interest and capital gains from sovereign debt, fewer investment restrictions, and higher limits for equity investments. Incentives to boost dollar inflows, including support for foreign-currency deposits and overseas borrowing by public sector companies, were also thrown in for good measure.
Economists estimate the measures could attract $30-50 billion in fresh inflows, helping plug India’s balance-of-payments gap and ease pressure on the rupee.
For now, the RBI’s priority is strengthening India’s external position and reassuring global investors that the country remains open for business despite an increasingly uncertain world.
MARKET WATCH
India’s stock market closed marginally lower today, as investors assessed the RBI’s steps to boost foreign inflows against a bearish outlook for the wider economy. The 30-share S&P BSE Sensex fell 0.16% to 74,243.34 points, even as the wider Nifty 50 ended the day 0.21% lower at 23,366.70.
India's benchmark bond jumped to a one-month high on the prospect of return of foreign capital into local debt and equity. The rupee gained 0.9% to end at 94.9450 per dollar, its biggest jump since 2 April.
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In tomorrow’s Lounge edition:
What to Watch this weekend
MINT MONEY
Inside a Bengaluru family’s spending diary
A Bengaluru couple’s candid breakdown of their ₹1.66 lakh monthly household expenses has struck a chord online, sparking debate over what it really costs to live comfortably in India’s tech capital.
Rent and utilities accounted for the biggest chunk at ₹68,000, followed by ₹31,000 on health and fitness, ₹29,000 on household help, and ₹18,000 on groceries.
The viral Instagram post, viewed over 1.3 million times, excluded investments and vacation spending. While some users called the budget realistic for a metro lifestyle, others argued families can live comfortably on far less, highlighting how personal spending choices shape perceptions of affordability. Read more.