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26-06-2025
Bureau Report
NEW DELHI/ MUMBAI: India’s economy remains resilient despite a state of flux in the global economy due to the twin shocks from trade and geopolitical tensions, the Reserve Bank of India said in its monthly bulletin released on Wednesday.
The RBI cut its key policy rate by a larger-than-expected 50 basis points earlier this month and slashed the reserve ratio for banks as low inflation gave it room to focus on supporting growth amid volatile global conditions.
“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 ‘State of the Economy’ article.
“Agriculture showed a broad-based increase in production across most major crops during 2024-25. The domestic prices situation remains benign with headline inflation staying below the target for the fourth consecutive month in May,” it said.
India’s annual retail inflation slowed to 2.82% in May, the lowest in more than six years, from 3.16% in April.
Financial conditions remain conducive to facilitate an efficient transmission of rate cuts to the credit market, the central bank said in the bulletin.
The trade policy outcomes in July, after the temporary tariff hiatus is over and the future course of geopolitical events would likely shape medium-term economic prospects, the RBI said.
“Going forward, as noted by the MPC (monetary policy committee) in its resolution, the MPC decided to remain data-dependent to chart the future course of monetary policy and strike the appropriate growth-inflation balance,” it said.
India’s retail inflation stayed below the central bank’s 4% target for the fourth straight month in May on easing food prices, reinforcing the case for last week’s surprise steep interest rate cut.
Annual retail inflation, opens new tab slowed to 2.82% in May, the lowest in more than six years, from 3.16% in April.
The May inflation print also marks the longest stretch of inflation remaining below the central bank’s 4% target in six years and was below economists’ estimate of 3% in a poll.
“Today’s print further confirms the moderating inflation trend witnessed over the last few months on the back of healthy agriculture supply. We expect the next inflation print to also be close to or below 3%,” Sakshi Gupta, an economist at HDFC Bank said.
The Reserve Bank of India (RBI) in a surprise move last week slashed its key policy rate by a larger-than-expected 50 basis points, to boost economic growth amid growing global uncertainties.
The central bank also trimmed its projection for retail inflation for 2025-26 to 3.7% from 4% earlier, citing a strong harvest and the early arrival of monsoon rains.
Inflation in food items which accounts for nearly half of the consumption basket- eased to 0.99% in May from 1.78% in the previous month. Vegetable prices fell 13.7% year-on-year, compared to an 11% fall in April.
The food inflation in May was the lowest since October, 2021, an official statement said.
Prices of cereals rose 4.77% on-year against a 5.35% increase in April, while those of pulses declined 8.22% from a year ago compared to a 5.23% fall last month.
India’9i80932s official statistics agency does not publish core inflation data.
