High frequency indicators point at sequential pickup in economic activity: RBI bulletin

RBI Bulletin highlights economic momentum, potential risks, and growth prospects for India amid global uncertainties.

High frequency indicators, like vehicles sales, air traffic, steel consumption and GST E-way bills, point towards a sequential pickup in momentum of economic activity during the second half of the fiscal 2024-25 and sustain moving forward, RBI Bulletin said on Wednesday (February 19, 2025).

However, a strong dollar, driven by US economic resilience and trade policy pivots, could exacerbate capital outflows from emerging economies, push risk premiums higher, and intensify external vulnerabilities, said an article on 'State of the Economy' published in RBI's February bulletin.

Economic activity momentum is poised to be sustained, strong rural demand is expected to receive a further fillip from the robust performance of the agriculture sector. Urban demand is also poised for a recovery, tracking decline in inflation as well as a boost to disposable incomes from the sizeable income tax relief announced in the Union Budget 2025-26.

"...high frequency indicators point towards a sequential pick-up in momentum of economic activity during H2:2024-25, which is likely to sustain moving forward," it said.

The economic activity index (EAI) is constructed by extracting the common trend underlying 27 high frequency indicators of economic activity using a Dynamic Factor Model.

It also noted that the global economy continues to grow at a steady but moderate pace, with divergent outlook across countries amid rapidly evolving political and technological landscapes.

Financial markets remain on edge on the slowing pace of disinflation and the potential impact of tariffs. Emerging market economies (EMEs) are witnessing selling pressures from foreign portfolio investors (FPIs) and currency depreciation engendered by a strong US dollar, the article said.