The Reserve Bank of India (RBI) released its monthly bulletin on Wednesday wherein it maintained that India’s economy remains resilient despite a state of flux in the global economy due to the twin shocks from trade and geopolitical tensions.
“In this state of elevated global uncertainty, various high-frequency indicators for May 2025 point towards resilient economic activity in India across the industrial and services sectors,” the RBI said in its ‘State of the Economy’ article.
Earlier this month, the central bank had cut its key policy rate by a larger-than-expected 50 basis points and slashed the reserve ratio for banks as low inflation gave it room to focus on supporting growth amid volatile global conditions. The central bank said that the financial conditions remained conducive to facilitate an efficient transmission of rate cuts to the credit market, the central bank said in the bulletin.
Here are 5 key takeaways from the RBI bulletin:
Monetary policy easing driven by benign inflation outlook
After assessing the current and evolving macroeconomic situation, the MPC had voted to reduce the policy repo rate by 50 bps to 5.50 per cent. “The near-term and medium-term outlook now gives us the confidence of not only a durable alignment of headline inflation with the target of 4 per cent, as exuded in the last meeting but also the belief that during the year, it is likely to undershoot the target at the margin,” the RBI bulletin said. Consequently, the inflation outlook for the financial year 2025-26 has been revised downwards from an earlier forecast of 4.0 per cent to 3.7 per cent.
This change in growth-inflation dynamics, the RBI bulletin stated, necessitates continued policy easing and frontloading rate cuts to support growth, as growth remains below aspirations amidst a challenging global environment.
Sanjay Malhotra, Governor, RBI, said, “From here onwards, the MPC will be carefully assessing the incoming data and the evolving outlook to chart out the future course of monetary policy in order to strike the right growth inflation balance.”
India’s economic resilience amidst global headwinds
Despite a global economy in flux, marked by trade policy uncertainties and geopolitical tensions, RBI said, the Indian economy portrays a picture of strength, stability, and opportunity. The provisional estimates released by the National Statistical Office (NSO) placed India’s real GDP growth in 2024-25 at 6.5 per cent. The RBi bulletin maintained that the domestic economic activity has exhibited resilience, characterized by a strong agricultural sector, comfortable food crop supply, and healthy reservoir levels. Industrial activity too is improving, though unevenly, while the services sector continues to grow steadily—evident from a strong services PMI of 58.8 in May 2025.
On the demand side, it added, private consumption remains healthy, with rising discretionary spending. Rural demand is steady, and urban demand is picking up. Investment activity is reviving, as seen in high-frequency indicators. Healthy corporate and bank balance sheets, government capex, and improved business sentiment are expected to further drive investments, the RBI said.
Sanjay Malhotra said, “In this global milieu, the Indian economy presents a picture of strength, stability, and opportunity.”
Significant strides in financial inclusion
Financial inclusion is seen as a key enabler for achieving sustainable development worldwide by improving the quality of lives of poor and marginalized sections of the society, aligning with at least seven of the United Nations Sustainable Development Goals. The RBI bulletin maintained that several policy measures towards furthering financial inclusion have been undertaken by the government. These include Pradhan Mantri Jan Dhan Yojana (PMJDY) and the JAM (Jan Dhan-Aadhar-Mobile) trinity, which have expanded access to banking services to over 95 per cent of households. The widespread adoption of UPI further exemplifies the power of innovation in driving financial inclusion. It further highlighted the efforts to achieve 100 per cent digital enablement in districts, with 514 districts already reaching this milestone by March 31, 2025.
“The provision of universal access to bank accounts has not only increased the potential reach of other financial services but has also enabled frictionless delivery of welfare programs to the targeted segment through adoption of Direct Benefit Transfer (DBT),” the RBI bulletin stated.
Insights into financial conditions and monetary transmission channels
The RBI bulletin also talked about a newly developed high-frequency Financial Conditions Index (FCI) for India, which integrates data on money, bond, foreign exchange and stock markets, using a PCA approach. It indicated that the financial conditions have remained congenial in the current financial year, supported by a buoyant equity market and ample liquidity in the money market.
The central bank said that the financial conditions remained conducive to facilitate an efficient transmission of rate cuts to the credit market.
RBI Guv’s principles for personal and professional success
RBi Governor Malhotra also talked about life lessons from his personal and professional experiences. “Times have changed a lot since I graduated. But there are certainly lessons which endure time. As a fellow-alumnus, roll number 85213, who has experienced life after campus, I will speak about four learnings from my journey,” he said.
Sanjay Malhotra talked about the imperative to continuously learn throughout life to avoid stagnation; the importance of questioning the status quo to foster innovation and improvement; the call to pursue virtuous Karma by making decisions with integrity, fairness, and courage; and the foundational necessity of building and preserving trust.