India charts a resilient path amid global trade turbulence: RBI

THEBUSINESSBYTES BUREAU

NEW DELHI, JULY 23, 2025

In the face of rising global trade uncertainties and tariff-related disruptions, the Indian economy stands firm, buoyed by robust macroeconomic fundamentals, according to the Reserve Bank of India’s latest State of the Economy report released on Wednesday. The report, part of the central bank’s monthly bulletin, reflects cautious optimism about India’s economic trajectory, even as the world grapples with geo-economic fragmentation and shifting trade policies.

While much of the global economy remains jittery about the implications of upcoming tariff hikes — particularly those driven by the United States — the RBI affirms that India’s growth outlook remains resilient. This resilience is credited to a confluence of favourable domestic factors: easing inflation, improved prospects for the ongoing kharif crop season, and the early deployment of government expenditure. These, along with targeted fiscal support and conducive financial conditions, are expected to reinforce aggregate demand in the coming quarters.

The RBI further highlighted that financial markets have shown a remarkable ability to digest trade policy uncertainties, likely anticipating less disruptive resolutions to ongoing trade negotiations. Yet, the central bank warns against complacency. “Underpricing of macroeconomic risk by financial markets remains a concern,” the bulletin cautioned, signalling the need for prudent financial management as global headwinds persist.

Amid ongoing efforts to finalise key trade agreements before the new import tariff regime takes effect from August 1, 2025, India is being presented with a strategic inflection point. “Building more resilient trade partnerships offers India the opportunity to deepen its integration into global value chains,” the RBI said. By leveraging this window, India could reposition itself as a dependable player in the reconfigured global trading order.

To safeguard long-term growth, the RBI underscores the urgency of domestic investment in infrastructure and comprehensive structural reforms aimed at enhancing competitiveness and productivity. Such measures, it noted, will not only provide a buffer against external shocks but also fortify India’s ability to maintain growth momentum in an unpredictable global environment.

“The evolving pattern of global trade flows and supply chains are far from settled,” the central bank observed, underscoring the importance of proactive policy interventions. As nations increasingly look inward or recalibrate their global alliances, India’s balanced approach — combining fiscal prudence, strategic investment, and trade diplomacy — could well emerge as a model for sustainable economic resilience.