RBI staff paper says India poised to benefit from supply chain realignments
This story was originally published at 17:56 IST on 22 April 2025
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--RBI paper: Dampening global econ outlook could hit India growth
--RBI paper: India consumption, investment less prone to external headwinds
--RBI paper: Above-normal monsoon forecast boosted farm sector prospects
--RBI paper: Above-normal monsoon could augment farm incomes
--RBI paper: Above-normal monsoon could keep food prices under check
--RBI paper: India poised to benefit from supply chain realignments
NEW DELHI – India will benefit from supply chain realignments caused by global trade uncertainty, Reserve Bank of India staff said Tuesday in the monthly State of the Economy article.
"India is poised to benefit from supply chain realignments, diversified FDI (foreign direct investment) sources, and engagement with global investors seeking resilience and scale, given its already established trade linkages," the staff paper said. "Calibrated policy support can help India turn global volatility into an opportunity and strengthen its position in the emerging world economic landscape."
The article, part of the central bank's monthly bulletin, does not represent the views of the central bank.
The RBI staff said the weakening global growth outlook could hit India's economic growth through weaker external demand. Global growth outlook has been hit by the increased trade and tariff tensions led by the trade policies of the US.
However, India's domestic growth engines, including consumption and investment, are relatively less susceptible to external headwinds, the RBI staff said.
The RBI earlier this month lowered its GDP growth forecast for the financial year 2025-26 (Apr-Mar) by 20 basis points to 6.5%, citing the impact from global trade and policy uncertainties. Economists have termed the RBI's FY26 growth forecast as optimistic and instead see this year's GDP growth closer to 6%.
The staff paper said that high frequency indicators suggest demand remained broadly resilient during Jan-Mar. The government's second advance estimate has pegged the FY25 GDP growth at 6.5%, which suggests that growth would be 7.6% in Jan-Mar. Economists see Jan-Mar growth closer to 7%. Official data will be released at the end of May.
A positive for the Indian economy is the forecast of an above-normal southwest monsoon in 2025, the staff paper said. "Prospects for the farm sector have been boosted by the forecast of an above-normal southwest monsoon in 2025, which could augment farm incomes and keep food prices under check," according to the paper.
Headline inflation fell to a 67-month low of 3.34% in March because of a moderation in food prices. The RBI has projected CPI inflation at 4% for FY26. End
Reported by Shubham Rana
Edited by Rajeev Pai
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