India's economic growth trajectory appears to be reaching a turning point, with multiple indicators suggesting the current slowdown phase may be bottoming out, according to a recent analysis. The report highlights that both interest rate cycles and liquidity conditions are now positioned to support economic expansion in the coming periods.
Economic Indicators Signal Positive Shift
The analysis, conducted by Motilal Oswal Financial Services, points to several key factors that indicate India's growth cycle is finding its footing after a period of moderation. Interest rate dynamics and liquidity conditions have emerged as particularly supportive elements for future economic performance.
According to the report's findings, India's GDP growth is expected to moderate to around 6.5 percent in fiscal year 2025, down from the estimated 7.6 percent growth in FY24. This projection aligns with the Reserve Bank of India's own forecast of 7 percent growth for the current financial year, though the central bank's Monetary Policy Committee has maintained a slightly more conservative estimate of 6.5 percent for FY25.
Monetary Policy Supporting Growth Trajectory
The research emphasizes that monetary policy conditions are becoming increasingly favorable for economic expansion. The interest rate cycle has reached its peak, with expectations building around potential rate cuts in the near future. This shift comes after a prolonged period of monetary tightening aimed at controlling inflation.
Simultaneously, liquidity conditions have improved significantly, moving from a deficit situation to a more balanced position. This normalization in liquidity is expected to provide additional support to economic activity, particularly for credit-sensitive sectors that rely on accessible financing.
Broader Economic Context and Implications
The analysis places India's current economic position within a global context, noting that while domestic indicators are turning positive, external factors continue to present challenges. The report suggests that the combination of supportive monetary conditions and structural reforms positions India for a sustainable growth recovery.
Looking ahead, the research indicates that the alignment of interest rate and liquidity cycles creates a foundation for accelerated economic activity in the medium term. This synchronization of monetary policy elements is particularly significant given the current global economic uncertainty and persistent inflationary pressures in many developed economies.
The report concludes that while short-term challenges remain, the fundamental drivers of India's economic growth are strengthening. The bottoming out of the growth cycle, combined with supportive monetary conditions, suggests that India may be entering a new phase of economic expansion that could build momentum through the remainder of 2024 and into 2025.
