‘Resilient economic activity’: RBI sees strong domestic momentum, global tensions cloud outlook

Economic activity in India remained resilient in May 2025 despite the dual pressures of global trade uncertainty and geopolitical tensions, the Reserve Bank of India said in its June Bulletin, citing high-frequency indicators across key sectors.“In this state of elevated global uncertainty, various high-frequency indicators for May 2025 point towards resilient economic activity in India across the industrial and services sectors,” the RBI said in its article titled State of the Economy, PTI reported.The central bank noted that financial conditions remain conducive to supporting the transmission of recent rate cuts, while headline inflation stayed below target for the fourth consecutive month in May. Agriculture, too, saw a broad-based rise in output across major crops during 2024–25.On the external front, the RBI said gross inward foreign direct investment (FDI) surged to $8.8 billion in April 2025, up from $5.9 billion in March and $7.2 billion in April last year. Manufacturing and business services accounted for nearly half of these inflows.Net FDI inflows more than doubled to $3.9 billion year-on-year in April 2025, while net outward investments also picked up, accompanied by a moderation in repatriation.The bulletin flagged signs of easing in some food prices. “High-frequency food price data for June so far (up to June 20) shows moderation in rates of pulses, while prices of cereals have risen marginally,” it said. Edible oil prices firmed up in soybean, sunflower and mustard categories, but declined in palm and groundnut oils.Among vegetables, onion prices continued to fall, while tomato and potato prices moved higher.While domestic indicators remain upbeat, the RBI warned that sustained global trade frictions and escalating geopolitical risks could dampen global growth prospects. “The intensifying geopolitical tensions too may further debilitate the already weakened growth impulses,” the article noted.It added that trade policy outcomes in July, once the current tariff truce ends, along with unfolding geopolitical developments, would significantly shape medium-term economic outlook.