More Stories

Informist, Wednesday, Jul. 23, 2025

 

Please click here to read all liners published on this story

--RBI paper: Econ activity held up on better kharif output prospects 
--RBI paper: Econ avtivity held up on strong svcs, industial sector momentum 
--RBI paper: Surplus system liquidity to aid faster rate cuts transmission 
--RBI paper:Fincl mkts have taken trade policy uncertainties in their stride 
--RBI paper: Underpricing of macroecon risk by fincl mkts remain a concern 
--RBI paper: Econ remains largely resilient on strong macroecon fundamentals 
--RBI paper: Resilient trade ties to aid India join global value chain 
--RBI paper: Rural demand remained resilient, rebound seen in urban demand 
--RBI paper: Frontloaded govt spending seen offsetting slowdown in pvt capex 
--RBI paper: High-frequency indicators suggest stability in aggregate demand 

 

NEW DELHI – Amidst rising trade uncertainties and geo-economic fragmentation, building more resilient trade partnerships will offer a strategic opportunity for India to deepen its integration into global value chains, according to an article by the Reserve Bank of India's staff, published Wednesday.

 

The comments come amid India's current discussions with the US government on a trade deal. US President Donald Trump, who has been sending individual letters to nations regarding reciprocal tariffs, has not yet announced any duties for India. As "intense" negotiations are underway for closing the trade deal with the US before the new import tariff rates kick in from Aug. 1, the focus is back on US trade policies and their spillover effects globally, the State of the Economy article in RBI's monthly bulletin said. 

 

"The evolving patterns of global trade flows and supply chains are far from settled. These uncertainties pose considerable headwinds to global economic prospects," it said.

 

Financial markets globally, the central bank's staff noted, seem to have taken trade policy uncertainties in their stride, possibly reflecting optimism about reaching trade deals that are less disruptive to the global economy. "Even so, underpricing of macroeconomic risk by financial markets remains a concern," the article said. The article, by the staff, does not represent the views of the central bank.  

 

Following the tariff blows triggered by Trump's policies, the average trade tariff rates are set to touch levels unseen since the 1930s, it said. "Moreover, risk of imposition of new high tariffs looms large for additional sectors."

 

Despite these exogenous uncertainties, the Indian economy remained largely resilient, supported by strong macroeconomic fundamentals, according to the report. Easing inflation, improving kharif crop prospects, front-loading of government expenditure, targeted fiscal measures, and congenial financial conditions for faster transmission of rate cuts should support aggregate demand in the economy going ahead, the article said.

 

"High-frequency indicators suggest stability in aggregate demand," it said. Over the last few months, domestic economic activity has held up, with improving prospects for the kharif agricultural season, the continuation of strong momentum in the services sector, and modest growth in industrial activity. Sectorally, growth in rural demand remained resilient and was accompanied by a recovery in urban economic activity, according to the article. This augurs well for India's growth momentum, which has been struggling with tepid urban demand, as reflected in data from fast-moving consumer goods companies. 

 

According to the article, system liquidity remained in surplus, which will facilitate a faster transmission of policy rate cuts to the credit markets. In a surprise move, the central bank's Monetary Policy Committee had lowered the policy repo rate by 50 basis points to 5.50% in June.  

 

Amidst global economic uncertainties, the central and state governments are front-loading spending, focusing on higher capital expenditure, which is helping to offset some of the slowdown in private capex spending, it said. The Narendra Modi government has relied on capital spending to boost economic growth since the COVID-19 pandemic, especially as private sector investments remain subdued. The Centre has spent INR 2.21 trillion on capital investments in the first two months of FY26, representing a 54% year-on-year increase. 

 

"In addition, measures to accelerate domestic investment in infrastructure and structural reforms aimed at improving competitiveness and productivity would build resilience while supporting the growth momentum," the article said.  End

 

Reported by Priyasmita Dutta

Edited by Saji George Titus

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.