Panorama February 2025 edition is out now!

Panorama is a meticulously crafted report that offers a comprehensive view of the macro factors and market trends shaping India’s economic landscape.

Here are the key insights from the report:

1. The central government aims to bring down the debt-to-GDP ratio to 50%±1% by FY31. Assuming a reasonable nominal GDP growth of 10%, the required fiscal deficit reduction would be 0.2% per year. Hence, fiscal consolidation is expected to slow down compared to the 80-bps consolidation in FY25 and 40-bps in FY26.
2. The budget delivers a Rs. 1 tn boost to consumption by reducing income tax rates under the New Tax Regime. As per back-of-the-envelope calculations, out of 75 mn taxpayers, 15–20 million are expected to benefit. Urban consumers are expected to benefit the most, potentially boosting discretionary consumption.
3. India’s yield curve has steepened over the past year as markets priced in RBI rate cuts. Further steepening is expected, with an additional 50–75 bps of rate cuts anticipated. From a one-year perspective, the 3-year to 7-year segment looks attractive from a risk-reward standpoint compared to long-duration bonds.
4. Liquidity conditions have tightened considerably because of RBI’s FX interventions to support the INR. Consequently, RBI has announced multiple measures to improve domestic liquidity, such as OMO purchases, FX swaps, etc. RBI is also expected to transfer a bumper dividend of ~Rs 2.1-2.4 tn, likely in May 2025, boosting domestic liquidity.
5. Weaker growth and a benign inflation outlook paved the way for a 25-bps rate cut in the February 2025 policy. The RBI forecasts CPI inflation at 4.2% YoY and GDP growth at 6.7% YoY for FY26. The RBI Monetary Policy Committee (MPC) notes that while growth is expected to recover from the Q2FY25 low, it remains well below last year’s level. Inflation is expected to moderate, supported by a favourable food outlook.
6. Equity markets have fallen from their peak, potentially triggering a reverse wealth effect and dampening demand. The increased post-pandemic investor participation, combined with significant exposure to underperforming mid-, small-, and thematic funds, could amplify the impact of the current market correction.

Click here to read the report