Mumbai, April 2025 — The Reserve Bank of India (RBI) released its April 2025 Monetary Policy Report, painting a cautiously optimistic macroeconomic outlook despite global volatility and lingering inflationary risks.
India’s domestic economy has demonstrated remarkable resilience, supported by a rebound in consumption and robust government capital expenditure. Strong services sector performance, high-capacity utilization, and healthy corporate and bank balance sheets have further fueled this momentum. Real GDP growth for 2024-25 stands at 6.6%, expected to rise to 6.7% in 2025-26, according to the National Statistical Office’s first advance estimates.
Consumer Price Index (CPI) inflation remained volatile in H2:2024-25, primarily driven by food price shocks. Headline inflation spiked to 6.2% in October 2024 — exceeding the upper tolerance band — before easing to 3.9% by Q4:2024-25. Relief arrived as food inflation moderated, supported by robust farm output and stable vegetable prices. The RBI projects CPI inflation between 3.9%-4.0% in Q3 of 2025-26, rising to 4.5% in Q4.
Acknowledging the ongoing disinflationary trend and strong macroeconomic fundamentals, the Monetary Policy Committee (MPC) unanimously voted to cut the policy repo rate by 25 basis points to 6.25%. This marks a shift from the stance of “withdrawal of accommodation” to a more neutral approach, maintaining flexibility amid evolving domestic and global conditions.
Globally, trade tensions, geopolitical risks, and commodity price fluctuations continued to soar. The US dollar spiked towards the end of 2024 as investors sought safe assets, while gold prices hit record highs amid inflation concerns and policy uncertainties.
Crude oil prices dropped from US$ 82 per barrel in October 2024 to US$ 73 in March 2025. According to RBI analysis, a 10% fall in oil prices could lower inflation by 30 basis points and boost GDP by 15 basis points. Conversely, rising oil prices could reverse these gains.
The report outlines several risk scenarios:
– A 100 bps decline in global growth could reduce India’s GDP growth by 30 bps and inflation by 15 bps.
– Conversely, a 50 bps increase in global growth could boost India’s GDP growth by 15 bps and inflation by 7 bps.
– A 5% depreciation in the rupee could push inflation higher by 35 bps but support short-term growth by 25 bps through the trade channel.
Surveys presented a mixed snapshot of sentiment. Consumer confidence in March 2025 showed positivity, especially regarding future expectations. Business optimism in the manufacturing sector saw a moderate dip for Q1:2025-26, while optimism in services and infrastructure sectors remained upbeat.
The RBI’s April 2025 Monetary Policy Report highlights a resilient Indian economy navigating a challenging global environment. With inflation moderating and policy support in place, the central bank remains committed to ensuring price stability while fostering conditions for sustained growth. Policymakers continue to monitor external shocks, commodity prices, and domestic inflation trends, keeping the door open for further calibrated policy actions.
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