[upbeat music] As per high-frequency indicators available from Jan to March two thousand twenty-five, Indian economic performance reflects sluggishness despite some positive developments such as increased government spending and improvement in order inflows. The overall activity level, however, remains below expectation, with growth projected at six point four percent for FY twenty-five, down from nine point two percent in FY twenty-four. Quarter four FY twenty-five growth is expected to track around six to six and a half percent rather than the anticipated seven percent growth. We typically look out for bank credit, GST collections, energy demand, and freight activity across road, rail, port, and air cargo to get an overall picture of demand, and these indicators suggest modest growth. In the energy sector, electricity generation saw weak growth, with petroleum consumption dropping to a five-month low. Bank credit growth remains sluggish at near eleven percent Y-o-Y. RBI has taken massive actions to ease liquidity conditions for banks, cut rates, and relax capital requirements. GST collections grew modestly, and freight activity, including road traffic, diesel consumption, railway freight, indicates a slowdown in goods movement. On the consumption side, weak auto sales contrasts strong air traffic. Personal loans have slowed, dampening consumer demand despite some positive effects from income tax cuts. Real rural wages have improved, but corporate wage growth has moderated. Agriculture prospects are positive, with a record rabi foodgrain production forecast. Sentiment has plateaued since September two thousand twenty-four, with rural consumer sentiment slightly better than the urban. Business indicators are mixed. While government capital expenditure has picked up since November two thousand twenty-four, contributing to improved order inflows, especially in sectors like power and infrastructure. On the other hand, business sentiment has weakened. And while CapEx growth is expected to slow in FY twenty-six, there is still some strength in capital goods production and imports. Externally, India's merchandise exports remain weak, but service exports are strong, growing, offsetting the downside in trade deficit on the goods side. Despite challenges from global trade uncertainties and tariff threats, India's trade balance remains fine due to services exports

Reciprocal tariffs have been averted by a quarter, and given the financial market mayhem in the US, one doubts whether they will see the light of the day in the size and form announced on April 2nd. Yet, World Trade Organization has slashed its goods export outlook to a mere zero point two percent growth versus a previously anticipated two point seven percent. From India's perspective, India is working on a trade agreement with the US to minimize or offset the negative impact, a move mirrored by around fifty or more other nations. There are some contentions with the US on Indian MSP structure, agriculture sector protection, dairy import, movement of digital data, and pharma patents where both nations need to arrive at a common ground. But we have to remember, except for the EU, China, and a few other nations, most countries are scrambling to secure a deal with the US. Hence, the speed with which the deal is sealed remains in question. In the near term, India faces significant business uncertainty, disruption, and the imminent risk of a growth slowdown in the US. A slowdown in the US growth will likely have a ripple effect on global growth. While there is a possibility that India could increase its export share to the US at the expense of China, there is also a high chance that cheaper Chinese and other Asian goods could flood other global markets outside the US, eroding India's share. What if the overall trade pie shrinks, leading to a decline in good exports globally as expected by WTO and thus even impacting India? India's goods export account for eleven percent of GDP, compared to twenty percent for China, thirty-six percent for Germany, and forty to eighty percent for ASEAN economies. Despite being a domestically oriented economy with a relatively low export dependence compared to other emerging markets, India also faces a downside risk to its FY twenty-six growth. For now, we project a near six percent growth in FY twenty-six. The positive support comes from better realization of government CapEx target, easy monetary policy, improved agri and rural income, and a restart of real estate launches. On the other hand, we are worried on a fall in exports due to weaker global growth and muted private CapEx activity on account of multiple business cycle uncertainty.

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