India Well Positioned to Navigate Global Headwinds Says RBI
India remains the fastest-growing major economy; inflation eases, exports, and GST reflect resilience
Mumbai: Persistent trade frictions, heightened policy uncertainty, and weak consumer sentiment continue to create headwinds for global growth.
Amidst these challenges, the outlook for India is one of cautious optimism, said the Reserve Bank of India in its May Bulletin released on Thursday.
According to IMF projections of April 2025, India is projected to remain the fastest-growing major economy in 2025 and is likely to surpass Japan this year to become the world’s fourth-largest economy.
In an article State of the Economy published in the RBI May Bulletin, the RBI noted that various high frequency indicators of industrial and services sectors sustained their momentum in April. The central bank said that inflation pressure has eased significantly and is poised for a durable alignment with the target in 2025-26. Headline CPI inflation fell for the sixth consecutive month to its lowest at 3.16 per cent in April and has been the lowest since July 2019, primarily driven by the sustained easing in food prices.
The prospects of a bumper rabi harvest and the outlook of an above normal monsoon would further strengthen rural consumption and are also likely to keep food inflation in check. Consumers and businesses remain confident, supportive of a strengthening of economic activity.
Domestic financial market sentiments, which remained on edge in April, witnessed a turnaround since the third week of May.
The Indian economy is exhibiting resilience despite the high trade and tariff-related uncertainty, said the RBI. Record goods and services tax (GST) collections at Rs 2.36 lakh crore in April also reflect the underlying resilience of the economy. During April 2025, India’s external sector remained resilient notwithstanding global uncertainty impacting supply chains. Merchandise exports growth remained robust in April despite the global trade policy uncertainties. Furthermore, services exports also remained strong in March.
“Indian economy continues to be ring-fenced by stability encompassing monetary, financial and political stability; policy consistency and certainty; congenial business environment; and strong macroeconomic fundamentals along with a policy ecosystem that is transparent, rule-based, and forward-looking.”
In the midst of global trade realignments and industrial policy shifts, India is increasingly positioned to function as a “connector country” that can become a key intermediary in sectors such as technology, digital services and pharmaceuticals. In this scenario, the recent completion of the free trade agreement with the UK points to a strengthening of bilateral trade linkages. “Going forward, notwithstanding the daunting challenges in the horizon, India stands well-positioned to navigate the ongoing global headwinds with confidence, ready to harness emerging opportunities and consolidate its role as a key driver of global growth,” said the RBI.
