At a time of elevated global uncertainty, various high-frequency indicators for May 2025 point towards resilient economic activity in India across the industrial and services sectors, said RBI officials in the June issue of RBI Bulletin which was released on Wednesday.
They said the provisional estimates released in May had reaffirmed growth to be 6.5% in 2024-25, with a significant sequential pickup in Q4.
“In fact, among the countries surveyed for the Purchasing Managers’ Index (PMI), the overall expansion in activity was the highest in India with the expansion in new export orders witnessed in May being an outlier, amidst contraction seen in other major economies,” they stated in the article “State of the Economy.”
“Capacity utilisation by manufacturing firms remained above its long-period average. High-frequency indicators of aggregate demand for May also suggested a pick-up in rural demand, especially given the strong performance of the agricultural sector,” they emphasized.
Stating that agriculture showed a broad-based increase in production across most major crops during 2024-25, they said the domestic prices situation remained benign with headline inflation staying below the target for the fourth consecutive month in May.
“Forward-looking surveys of consumer sentiments show stable consumer confidence for the current period and improved optimism about the future. All of these indicate considerable resilience of the Indian economy, notwithstanding the global economic, trade, and geopolitical uncertainties,” they highlighted.
Emphasizing that domestic inflation remained benign with headline inflation remaining below the target for the fourth consecutive month in May, they said the record domestic crop production in 2024-25 agricultural season was translating into a sharp and sustained easing of food price inflation.
As per the article high-frequency food price data for June so far (up to June 20, 2025) showed a moderation in prices of pulses while prices of cereals had risen marginally.
“Edible oil prices, on the other hand, have firmed up driven by soybean, sunflower, and mustard oil, while palm and groundnut oil prices have moderated. Among the key vegetables, prices of onion have recorded further correction, while potato and tomato prices have increased,” the officials wrote in the article.
They said the headline inflation, as measured by y-o-y changes in the all-India consumer price index (CPI), moderated to 2.8% in May 2025 (the lowest since February 2019) from 3.2% in April.
“The decline in headline inflation by 34 bps came from a negative base effect of 54 bps, which more than offset a positive price momentum of 20 bps. A positive momentum was recorded across all groups within CPI,” they stated.
Food inflation (y-o-y) decelerated to 1.5% in May, the lowest in 73 months. Within subgroups, vegetables, pulses, and meat and fish continued to record deflation, they said.
A moderation in inflation was also observed in cereals, eggs, sugar, and fruits. Inflation, however, picked up in milk and products, oils and fats, and non-alcoholic beverages, they added.
“Spices continued to record deflation, albeit at a slower pace, while inflation in prepared meals remained steady,” they said.
Financial conditions remained conducive to facilitate an efficient transmission of rate cuts to the credit market, they pointed out.
Emphasizing that protracted trade policy uncertainties and rising trade barriers pose the risk to global economy, they said the intensifying geopolitical tensions too may further debilitate the already weakened growth impulses.
In this context, the trade policy outcomes in July, after the temporary tariff hiatus is over, and the future course of geopolitical events would likely shape the medium-term economic prospects, they concluded.
Published – June 25, 2025 07:33 pm IST
