US Fed Policy Rate Kept Unchanged Amid Elevated Inflation

Context
The US Federal Reserve has kept interest rates unchanged due to sticky inflation and strong economic activity.

Impact on Indian Economy

1. Capital Flows
   • Stable US rates reduce sudden outflow of foreign capital from India.
   
2. Rupee Stability
   • Less pressure on rupee depreciation against the dollar.
   
3. RBI Policy Space
   • RBI gets flexibility to focus on domestic inflation and growth.
   
4. Equity Markets
   • Neutral-to-positive for Indian stock markets due to global certainty.
   
5. Borrowing Costs
   • No immediate rise in global borrowing costs for Indian firms and the government.

Index of Industrial Production Grows 7.8%, 26-Month High

Context
India’s Index of Industrial Production (IIP) grew 7.8% in December 2025, a 26-month high, driven mainly by manufacturing, electricity, and strong capex-led demand, especially in infrastructure and capital goods.

Index of Industrial Production (IIP)
• What: Measures short-term changes in industrial output.
• Published by: National Statistical Office (NSO), Ministry of Statistics & Programme Implementation.
• Frequency: Monthly.
• Sectors & weights:
• Manufacturing ~77.6%
• Mining ~14.4%
• Electricity ~8.0%
• Current base year: 2011–12
• Proposed new base year: 2022–23
• Use: Tracks industrial momentum and feeds into GDP estimates.

Eight Core Industries
• What: Subset of IIP with ~40% weight.
• Industries: Coal, Crude Oil, Natural Gas, Refinery Products, Fertilisers, Steel, Cement, Electricity.
• Index published by: Ministry of Commerce & Industry (monthly).
• Importance: Early signal of infrastructure and industrial activity.