The Reserve Bank of India (RBI) in its June Bulletin has highlighted a report indicating global economic instability driven by trade policy uncertainty and escalating geopolitical tensions.
The RBI’s June 2025 Bulletin reveals that despite ongoing uncertainties and geopolitical tensions at the global level, India’s economy remains robust. The bulletin’s article titled “Economic Situation” states that high-frequency economic indicators for May 2025 show accelerated activity in both the country’s industrial and service sectors.
Global Economic Volatility
The bulletin notes that the global economy is currently facing dual pressures – trade policy uncertainty on one hand, and rising geopolitical tensions in various parts of the world on the other, impacting investment, production, and supply chains. Nevertheless, India’s economy has proven resilient in the face of these pressures.
Strength in India’s Industrial and Service Sectors
RBI states in the bulletin that the data for May 2025 indicates that India’s industrial and service sectors are currently active and b. Improvements have been observed in high-frequency indicators such as industrial production, electricity consumption, transportation, air traffic, and banking transactions. This suggests that the country’s economic machinery is functioning smoothly.
Growth in Agriculture as Well
According to the bulletin, there has been a significant increase in the production of major crops during 2024-25. Particularly, advancements in kharif and rabi crops, coupled with improved irrigation systems and government initiatives, have yielded positive results in agriculture. This has not only boosted rural demand but also ensured stability in the supply of food items.
Inflation Under Control
India’s overall inflation (including food and energy prices) remained below the RBI’s target for the fourth consecutive month in May 2025. This reflects the success of the country’s economic management and provides some relief to the public from rising prices. Furthermore, stability has been maintained in the prices of food items and petroleum products.
Favorable Environment for Loans and Interest Rates
The bulletin also indicates that the country’s financial conditions are currently quite favorable. The benefits of recent interest rate cuts are gradually reaching the loan market and the general public. Liquidity remains in the banking system, and there is increased activity in banks’ lending operations.
RBI’s Clarification
The Reserve Bank of India has clarified that the article published in the bulletin represents the private views of its authors and does not necessarily reflect the RBI’s official stance. However, the data and analyses presented can provide an indication of the direction in which India’s economy is moving.
Improvements in Exports and Imports
Early in 2025, there have been signs of improvement in both India’s export and import sectors. Companies in the electronics, pharmaceutical, and automotive sectors have performed well. Simultaneously, there has been a reduction in imports of crude oil and coal, leading to a slight decrease in the trade deficit.
Rural Economy Supported by Agriculture
The rural economy has been bolstered by the improved performance of agriculture, alongside increased employment opportunities through schemes like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). This has boosted consumption in villages and led to a surge in sales for FMCG companies.
Persistent Global Challenges
The RBI Bulletin also acknowledges that challenges remain on the global front. Monetary policy decisions by the US Federal Reserve, signs of a recession in Europe, China’s slow economic recovery, and the ongoing situation in the Middle East and Ukraine could indirectly impact India.
