New Delhi – The Reserve Bank of India (RBI) has affirmed the strength of the Indian economy despite persistent global uncertainties, citing the robust performance of the industrial and services sectors as key contributors to this resilience.
Global Slowdown, But India Stands Firm
According to the RBI’s latest statement, the global economic environment continues to face hurdles such as trade tensions, policy uncertainties, and tariff-related concerns. Despite these challenges, India’s macroeconomic fundamentals remain strong, positioning the country as a standout performer in a slowing global economy.
Industrial and Services Sectors Drive Momentum
The central bank highlighted that high-frequency indicators for both the industrial and services sectors maintained their momentum in April 2025. Additionally, better rabi crop yields, an increase in sown area for summer crops, and a favorable forecast for the southwest monsoon all signal positive prospects for the agricultural sector.
Inflation Trends Provide Relief
Headline CPI inflation has continued its downward trend for the sixth consecutive month, reaching its lowest level since July 2019. This decline is primarily attributed to falling food prices. Inflation based on the Consumer Price Index for Agricultural Labourers (CPI-AL) and Rural Labourers (CPI-RL) fell significantly in April 2025, reaching 3.48% and 3.53% respectively — a steep drop from 7.03% and 6.96% in April 2024. This has brought much-needed relief to low-income rural households.
Domestic Financial Markets Show Recovery
While domestic financial markets experienced volatility in April, particularly after the U.S. announced new tariff measures, sentiment improved in the third week of May, driven by strong Q4 corporate earnings from banking and financial services companies.
Currency in Circulation Growth Slows
In a broader economic context, the RBI bulletin also noted that the growth of notes in circulation (NIC) in terms of value during 2014–2024 was significantly lower than in the previous two decades. Between 1994 and 2004, NIC growth outpaced GDP growth, but the gap has narrowed substantially in recent years. This indicates a shift towards more formalized economic activity and a declining reliance on cash transactions.
Additionally, the RBI highlighted a positive correlation between night-time satellite lights and tax collections, as well as between night-time lights and GDP. This further confirms that economic activity is increasingly being captured through formal channels, reducing the need for high cash usage.
Despite global turbulence, India’s economic engine continues to run strong, buoyed by solid sectoral performance, declining inflation, improved rural purchasing power, and stabilizing financial markets. The RBI’s assessment underscores a growing confidence in India’s ability to navigate global headwinds and reinforces the nation’s position as one of the world’s most resilient major economies.
