India’s Economy Shows Resilience Amid Global Uncertainty: RBI’s June 2025 Bulletin

In its latest State of the Economy report published in the June 2025 RBI Bulletin, the Reserve Bank of India (RBI) has highlighted continued domestic economic resilience despite global uncertainty, softening credit growth, and evolving financial conditions. The report was authored by RBI staff under the guidance of Deputy Governor Poonam Gupta.

Key Highlights

Growth and Resilience

• India’s economy remains robust amid global instability, supported by strong financial conditions and monetary easing.
• GDP growth for FY25 was reaffirmed at 6.5%, with Q4FY25 showing notable momentum.
• Consumer confidence and rural demand indicators continue to reflect stability.

Monetary Policy Transmission

• Policy repo rate has been cut by 100 bps between February and June 2025, currently standing at 5.5%.
• A 100 bps phased reduction in Cash Reserve Ratio (CRR) starting 6 September 2025 is expected to release ₹2.5 trillion in primary liquidity.
• This aims to lower funding costs for banks and enhance credit flow to productive sectors.

Lending and Deposit Rates

• Post-rate cuts:
• Lending rates:
  • Fresh rupee loans: ↓ 6 bps
  • Outstanding loans: ↓ 17 bps
• Term deposit rates:
  • Fresh deposits: ↓ 27 bps
  • Outstanding deposits: ↓ 1 bp
• Indicates gradual but positive monetary transmission.

Credit Growth Trends

• Scheduled commercial banks’ credit growth slowed to 9.9% (as of May 30, 2025), down from 16.2% a year earlier.
• Sectors most affected:
• Agriculture and services witnessed the sharpest deceleration.
• External Commercial Borrowings (ECBs) remained healthy despite a slight dip since March 2025.

Global Headwinds

• The global economy is being affected by:
• Trade policy uncertainties
• Escalating geopolitical tensions
• These factors will shape India’s medium-term growth outlook, especially post-July 2025 when the temporary tariff truce ends.

Additional Developments

• RBI to extend overnight money market trading hours from July 1, 2025, to enhance liquidity management.
• Net FDI inflows rose to $3.9 billion in April 2025, indicating sustained investor confidence.

Implications

• Monetary easing combined with targeted liquidity infusion is expected to support credit growth recovery in H2FY25.
• Policymakers and markets should stay alert to external risks, especially trade disruptions and geopolitical escalations.
• RBI’s proactive stance and liquidity operations may anchor inflation expectations while nurturing growth.

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