Related Insights
India’s inflation trajectory is expected to stay close to target in the coming months, aided by domestic as well as global catalysts of low crude prices, relatively stable currency and disinflationary impact of excess capacity (collateral of tariff action) being redirected to the region. Inflation in March, due today, likely stayed benign at 3.5% yoy compared to 3.6% the month before as food costs declined for a fifth consecutive month on sequential basis. Staple vegetables corrected on month-on-month terms, while edible oil and sugar were up marginally, based on the high frequency data published by government agencies. Core inflation is poised to break above 4% on higher gold prices and education costs, overshooting the headline for a second month. In all, Jan-Mar25 inflation is set to average 3.8%, taking FY25 to 4.6%, a shade below our estimate. Looking ahead, we build a modest weather-related disruption to food disinflation in Apr-Jun due to higher temperatures and drier conditions, which will reflect in sequential trends, but the headline is expected to stay close to 4%. Steady rupee and low oil prices will cap imported price pressures, while higher gold feeds through the services category. These developments are likely to see full year inflation average close to 4.0-4.2% (India: Tariffs and RBI’s three imperatives).
In addition to proactive RBI measures to boost the core liquidity balance last quarter and Apr-Jun25, a windfall by way of surplus transfer from the central bank to the government is in the pipeline, with the announcement due next month. High dollar sales by the RBI to defend the currency at the start of the year, liquidity operations and fund support for banks have added to expectations that the surplus payout might rise to a record high of ~INR 2.6-2.8trn, beating INR 2.1trn in FY25. This payout will not only bode well for liquidity but also emerge as an important revenue stream to offset a slower rise in tax collections. Separately, further clarity is awaited on the US tariffs end, particularly on the pharma sector. While the direct impact of a baseline 10% US tariff on India’s growth will be limited (exports to the US was at 2.2% of GDP in 2024), a bigger risk is the spillover impact from slower or recessionary conditions in the US. Our growth forecast for FY26 faces downside risks. 
Topic
Explore more
E & S Macro StrategyGENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates)
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.