According to the RBI’s monthly economic bulletin published on Wednesday, a number of high-frequency indicators for May 2025 suggest that India’s industrial and services sectors would see robust economic activity despite the increased level of global uncertainty.

During 2024–2025, agriculture demonstrated a widespread increase in production across the majority of main crops. According to the report, headline inflation in May remained below the target for the fourth consecutive month, indicating that the domestic pricing situation is still benign.

It also emphasizes how favorable financial conditions persisted, allowing rate reductions to be effectively transmitted to the lending market.

According to the report, uncertainty around trade policy and a rise in geopolitical tensions have left the world economy in a state of instability.

On the home front, however, the May provisional projections confirmed that India’s growth would be 6.5 percent in 2024–2025, with a notable sequential increase in Q4. Numerous high-frequency indicators for May show indications of robust economic activity in the services and industrial sectors.

In actuality, India had the largest overall gain in activity among the nations assessed for the Purchasing Managers’ Index (PMI), with the growth in new export orders in May standing out as an exception among contraction in other significant economies. Manufacturing companies’ capacity utilization stayed higher than its long-term average.

Given the agricultural sector’s impressive performance, high-frequency indicators of May’s aggregate demand also pointed to an increase in demand in rural areas. Consumer sentiment polls that look ahead reveal increasing optimism for the future and steady consumer confidence for the present. The RBI report notes that all of these show the Indian economy’s remarkable resilience in the face of global trade, economic, and geopolitical challenges.

Additionally, it emphasizes that headline inflation in May remained below the target for the fourth consecutive month, indicating that domestic inflation is still benign. Food price inflation is sharply and steadily declining as a result of record domestic crop production in the 2024–25 growing season. According to the research, stable core inflation with signs of slight cooling after removing the influence of erratic and high gold and silver prices suggests that underlying inflationary pressures are still low.

It also emphasizes that, despite varying movements brought on by international cues regarding the economic outlook, news pertaining to tariffs, and the changing local situation, equity markets saw moderate advances in May and June. The Middle East’s escalating geopolitical tensions caused the stock market to experience a brief, steep decline before seeing a notable recovery on June 20.

The RBI bulletin further notes that while credit growth slowed in April, particularly in the services and agriculture sectors, non-bank credit sources, such as external commercial borrowing (ECB) inflows, remained robust, albeit somewhat slower than in March. Overall, the state of the economy was still favorable for effectively communicating rate reductions to the credit market.

Additionally, it notes that the external sector remained strong, with sufficient foreign exchange reserves to finance imports and external debt.