An article on ‘State of the Economy’ in RBI July Bulletin said the global macroeconomic environment remained fluid in June and July so far amidst geopolitical tensions and tariff policy uncertainties.
“Domestic economic activity held up, with improving kharif agricultural season prospects, continuation of strong momentum in the services sector and modest growth in industrial activity,” it said.
The bulletin also mentioned that headline CPI inflation remained below 4% for the fifth consecutive month in June driven by deflation in food prices.
System liquidity remained in surplus to facilitate a faster transmission of policy rate cuts to the credit markets.
The external sector remained resilient, backed by ample foreign exchange reserves and a moderate external debt-to-GDP ratio, it mentioned.The bulletin also mentioned that a 10% rise in global crude oil prices could increase India’s headline inflation by around 20 basis points on a contemporaneous basis, as per empirical estimates.The increase in oil import dependency warrants measures not only to contain the spillovers to domestic prices but also to gradually transit towards alternative sources of fuel for more efficient management of domestic fuel prices in the long run, it said.
Highlighting Inflation Expectations Survey of Households, it said that the expectations exhibit systematic upward bias compared to those of professionals and businesses, even in periods of stable or low inflation.
The central bank, however, said the views expressed in the Bulletin article are of the authors and do not represent the views of the Reserve Bank of India.
