Multiple uncertainties emanating from the high tariffs to be imposed by the Trump administration in the U.S. poses considerable headwinds to global economic prospects, while underpricing of macroeconomic risk by financial markets remains a concern, Reserve Bank of India (RBI) officials have said in the July edition of the RBI Bulletin released on Wednesday.
And amidst rising trade uncertainties and geo economic fragmentation, India has an opportunity to deepen its integration with global value chains by building more resilient trade partnerships, they said.
“As intense negotiations are underway for closing trade deals before the new import tariff rates kick in from August 1, 2025, the focus is back on U.S. trade policies and their spillover effects globally. Financial markets, however, seem to have taken trade policy uncertainties in their stride, possibly reflecting optimism on reaching trade deals that are less disruptive to the global economy,” the offiicials said in the article ‘State of the Economy’.
“Even so, underpricing of macroeconomic risk by financial markets remains a concern. The average trade tariff rates are set to touch levels unseen since the 1930s. Moreover, risk of imposition of new high tariffs looms large for additional sectors,” they wrote in the article.
Stating that the evolving pattern of global trade flows and supply chains were far from settled, they stated, “These uncertainties pose considerable headwinds to global economic prospects.”
Despite global uncertainties, the Indian economy remains largely resilient, supported by strong macroeconomic fundamentals, they emphasised.
“Easing inflation, improving kharif season prospects, front-loading of government expenditure, targeted fiscal measures and congenial financial conditions for faster transmission of rate reductions should support aggregate demand in the economy, going forward,” they said. “Amidst rising trade uncertainties and geo economic fragmentation, building more resilient trade partnerships presents a strategic opportunity for India to deepen its integration with global value chains,” they pointed out.
In addition, measures to accelerate domestic investment in infrastructure and structural reforms aimed at improving competitiveness and productivity would build resilience while supporting the growth momentum, they mentioned.
Meanwhile, the domestic economy headline inflation, as measured by YoY changes in the all-India consumer price index (CPI), declined to 2.1% in June 2025 (the lowest since January 2019) from 2.8% in May . The fall in headline inflation by 72 bps came from a favourable base effect of 133 bps, which more than offset a positive price momentum (m-o-m change) of 62 bps.
“For the first time since February 2019, food group registered a deflation of (-) 0.2% (YoY) in June as against an inflation of 1.5% in May. This was driven by a deflation within vegetables, pulses, and meat and fish sub-groups,” the officials said.
Inflation in cereals, fruits, milk and products, oils and fats, sugar and confectionery, and prepared meals moderated while that in eggs edged up.
Core inflation inched up to 4.4% in June 2025 from 4.2% in May. The increase in core inflation was primarily due to a sharp rise in inflation in the personal care and effects sub-group. Sub-groups such as recreation and amusement, household goods and services, health, transport and communication and education also recorded an increase in inflation. While clothing and footwear recorded lower inflation, that of pan, tobacco and intoxicants, and housing remained unchanged, they added.
In terms of regional distribution, both rural and urban inflation eased further to 1.7% and 2.6%, respectively, in June, with a greater fall witnessed in rural inflation.
Published – July 23, 2025 08:50 pm IST