RBI: India’s Economic Activity Remains Strong Despite Global Uncertainty
On June 26, the Reserve Bank of India (RBI) stated in its report on the "State of the Economy" that India's economic momentum remains strong despite heavy global volatility and uncertainty. This is supported by regular economic data, which continues to reflect a positive trend.
The report highlights that financial conditions remained broadly favorable, allowing the benefits of the repo rate cut to pass smoothly across sectors, even though credit allocation slowed in April. The RBI’s Monetary Policy Committee reduced the repo rate by 100 basis points from February to June, bringing it to 5.5%.
Global Volatility, Local Strength
The RBI report acknowledges intense fluctuations in the global economy, impacted by policy uncertainty and worsening geopolitical tensions. Despite these challenges, many indicators in May 2025 pointed to robust economic activity in India across both industrial and service sectors.
Though temporary tariff halts and trade deals lifted market sentiment in early May and June, the onset of war between Iran and Israel renewed global uncertainty, impacting financial markets. The report also cites OECD and World Bank forecasts, which predict that tariffs and restrictions could hurt global growth prospects in the medium term.
India's Resilience
On the domestic front, conditions remain favorable. Provisional estimates released in May confirm India’s GDP growth for 2024-25 at 6.5%, with a strong performance in the fourth quarter. The PMI for India outpaced that of many other countries, reflecting continued business momentum. While other nations saw a decline in new export orders, India secured more deals.
Manufacturing companies reported capacity utilization above the long-term average, and strong performance in the agricultural sector supported rural demand. These trends underscore the resilience of India’s economy.
Inflation and Lending
Inflation remained low, with headline inflation staying below RBI’s target for four consecutive months through May. Though credit growth slowed in agriculture and services during April, other credit sources maintained stable momentum, according to the report.
Overall, the report concludes that despite geopolitical and trade uncertainties globally, India’s economic activities have remained on a strong and stable path.