Indian Economy Remains Largely Resilient Despite Global Uncertainties: RBI Article

Why in News? A recent article published in the RBI’s July Bulletin highlights that the Indian economy continues to remain resilient amidst global geopolitical tensions and uncertain macroeconomic conditions.

 Prelims Focus:

• RBI’s State of the Economy article

• India’s inflation trend

• Tariff trends (lowest since 1930s)

• All-India Unemployment Rate

Key Highlights from the RBI Article:

Resilience Amid Global Uncertainty

• Despite geopolitical tensions and global economic policy uncertainties, India’s economy is strong and macroeconomically stable.

• This is attributed to:

  • Strong rural and urban demand

  • Momentum in the services and agriculture sectors

  • Positive signals from kharif sowing and capital expenditure

 Tariffs at Historical Lows

• Average trade tariff rates are expected to fall to levels last seen in the 1930s.

• This is due to:

  • Lower import tariffs

  • Ongoing global trade negotiations

  • India’s trade liberalisation push

Employment and Demand Trends

• All-India unemployment rate remained unchanged from the previous month at 5.6%.

• Rural areas performed better in employment than urban counterparts.

Government Expenditure

• Between April and May 2025:

  • Total expenditure grew by 19.7% year-on-year

  • Capital expenditure rose by 41.2% during the same period, showing front-loading of capital spending.

 Inflation Trends

• India’s headline inflation (Consumer Price Index – CPI):

  • Fell to 2.1% in June 2025 – lowest since January 2019

  • Down from 2.8% in May 2025

  • Well below the RBI’s target of 4%

 Global Context & Sentiment

• Positive market sentiment due to:

  • Easing geopolitical tensions

  • Optimism around US-China trade negotiations

  • Reduced commodity prices

• However, risks remain from:

  • High tariffs on additional sectors

  • Global supply chain bottlenecks