<h1>Economic momentum rises as high-frequency indicators show pickup, moderated by external vulnerabilities from capital outflows.</h1> High-frequency indicators signal a sequential pickup in economic activity in H2 of fiscal 2024-25, supported by strong rural demand and recovering urban demand as inflation eases and tax relief boosts incomes. The RBI constructs an Economic Activity Index from 27 indicators via a Dynamic Factor Model. The article warns of external vulnerabilities from a strong US dollar and FPI outflows causing currency pressures, while highlighting policy measures-budget support for key sectors, a repo rate cut, rising FDI, greater PSB transaction share and fewer UPI technical declines-that together influence medium-term growth and financial stability.