Domestic demand acts as the primary engine for this stability, with vehicle and tractor sales signaling sustained purchasing power. Industrial output hit a two-year high in June, driven by a broad acceleration in manufacturing, while the services sector continues to provide a reliable buffer. A recovery in monsoon conditions during July further bolsters the outlook, particularly for the agricultural-linked economy.
Financial conditions have shown parallel improvement. Liquidity, which tightened briefly in late July due to tax outflows, recovered in August as government cash balances were drawn down. This shift helped soften overnight money market rates and stabilized commercial paper yields. While headline consumer price inflation saw a marginal uptick due to food costs, core inflation remains anchored. Even as 10-year government security yields fluctuate in response to volatile crude oil prices and US Treasury movements, the central bank maintains that the combination of manufacturing strength and service-sector resilience positions India to navigate the current period of international uncertainty.
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