MUMBAI: Amidst a challenging global environment affected by geo-political tensions and tariff policy uncertainties, the Indian economy showed resilience in June and July so far, the Reserve Bank of India (RBI) said in its July Bulletin released on Wednesday. “Domestic economic activity held up, with improving kharif agricultural season prospects, continuation of strong momentum in the services sector and modest growth in industrial activity,” said the RBI in an article ‘State of Economy’, in the Bulletin. The central bank said that high-frequency indicators suggest stability in aggregate demand. Speaking about inflation, the RBI economists said that the headline CPI inflation remained below 4 per cent for the fifth consecutive month in June driven by deflation in food prices. It declined to 2.1per cent in June 2025 (the lowest since January 2019) from 2.8 percent in May. The fall in headline inflation by 72 basis points (bps) came from a favourable base effect of 133 bps, which more than offset a positive price momentum (m-o-m change) of 62 bps. Early onset and timely progress of southwest monsoon have helped to boost kharif sowing to 708 lakh hectares (as on July 18, 2025), registering 4.1 per cent growth compared to the corresponding period of last year. The bulletin also mentioned that a 10 per cent rise in global crude oil prices could increase India’s headline inflation by around 20 basis points on a contemporaneous basis, as per empirical estimates. The increase in oil import dependency warrants measures not only to contain the spill overs to domestic prices but also to gradually transit towards alternative sources of fuel for more efficientmanagement of domestic fuel prices in the long run, it said. In June, RBI’s Monetary Policy Committee cut the repo rate by 50 basis points to 5.5 per cent, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began inFebruary. The RBI also noted that central banks in many advanced economies (AEs) have kept policy rates unchanged, as the last mile of disinflation turned out to be stickier than expected, while also awaiting clarity on the trade tariff front and its implications for inflation. The RBI said that credit information companies (CICs) should aim for near real-time credit data updates to make the credit reporting system faster and more inclusive.
Source link
