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The Hindu
6 hours ago
- Business
- The Hindu
Trade uncertainties posing headwinds to global economic prospects: RBI bulletin
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.
Hans India
8 hours ago
- Business
- Hans India
Indian economy largely resilient despite global uncertainties around tariffs: RBI
New Delhi: Despite global uncertainties around tariffs, the Indian economy remains largely resilient, supported by strong macroeconomic fundamentals, the Reserve Bank of India (RBI) said on Wednesday. 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, according to the RBI Bulletin's 'State of the Economy' report. "Amid 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. 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," the central bank's document emphasised. Earlier in the day, a Morgan Stanley report said it expects India's economy to be the third-largest globally by 2028 and more than double in size to $10.6 trillion by 2035. The Asian Development Bank (ADB) said that India's GDP growth is projected to grow at 6.5 per cent in 2025, and a robust 6.7 per cent in 2026, amid strong domestic demand, a normal monsoon and monetary easing in the country. When it comes to inflation, the country is likely to clock 3.8 per cent inflation this year, followed by 4.0 per cent in 2026 -- well within the RBI projections, the ADB added. According to the RBI Bulletin, 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 US 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," said the Reserve Bank, adding that even so, "underpricing of macroeconomic risk by financial markets remains a concern". "The evolving pattern of global trade flows and supply chains are far from settled. These uncertainties pose considerable headwinds to global economic prospects," it noted.
Business Standard
26-06-2025
- Business
- Business Standard
India's Financial Conditions Index indicates more congenial financial conditions
An article in the June RBI Bulletin attempts to construct a financial conditions index (FCI) for India at daily frequency, using select indicators from the money, G-sec, corporate bond, equity, and forex markets. The primary objective is to construct a composite indicator that tracks overall conditions in financial markets at a high frequency. The FCI assesses the degree of relatively tight or easy financial market conditions with reference to its historical average since 2012. The estimated FCI traces movements in financial conditions across both periods of relative calm as well as crisis episodes. The index suggests that in the aftermath of the pandemic, exceptionally easy financial condition was driven by the combined impact of amiable conditions across all market segments. Financial conditions continued to remain relatively easy since mid-2023 before firming up from November 2024. In the current financial year, however, it has remained congenial riding on a buoyant equity market and a money market suffused with liquidity.
Business Standard
26-06-2025
- Automotive
- Business Standard
Urban demand moderates, rural demand shows improvement: RBI Bulletin
As per the RBI Bulletin, high-frequency indicators for May present mixed signals on aggregate demand. Urban demand showed signs of moderation as passenger vehicle sales declined with a sharp drop in entry-level segment. However, rural demand improved as evident from the increase in the retail sales of two-wheelers. During May 2025, household demand for work under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) picked up, following the pursuit of alternative avenues for employment in the pre-sowing lean agricultural period and an increase in MGNREGS wage rates. Petroleum consumption expanded for the first time in the last four months, driven by petrol. Unseasonal rains and premature onset of monsoon, however, led to a reduction in electricity demand. Overall economic activity remained robust in May 2025, with key high-frequency indicators like E-way bills, Goods and Services Tax (GST) revenue, toll collections, and digital payments showing strong growth.
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Business Standard
25-06-2025
- Business
- Business Standard
Share of public sector banks in CD issuances rises to 69% in 2024: RBI
The share of public sector banks (PSBs) in issuing certificates of deposit (CDs) rose significantly from 2022 to 2024, while the share of private sector banks (PVBs) declined, according to a report in the RBI Bulletin. PSBs' share surged to 69 per cent in December 2024 from just 6 per cent in 2022, whereas PVBs' share fell to 30 per cent from 85 per cent during the same period. 'This contrasts with the general perception that CD issuance is largely dominated by private sector banks to supplement their current and savings account (CASA) deposits,' the report noted. Mutual funds have remained the primary investors in CDs, supported by increased retail participation in equity markets, which in turn led to greater asset allocation by mutual funds, the report added. Driven by strong credit growth outpacing deposit growth and tight liquidity conditions, banks have increasingly turned to CD issuances. In the fourth quarter of FY25, CD issuances surged to a record Rs 3.70 trillion. 'During Q4 FY25, CD issuances hit an all-time high of Rs 3.70 trillion, amid robust credit demand, liquidity deficit and sluggish deposit growth,' the report stated. It also noted that small finance banks (SFBs) had to offer relatively higher rates, whereas PSBs were able to raise funds at more competitive rates. Globally, banks and deposit-taking institutions are the primary issuers of CDs, while investors typically include mutual funds, pension funds, insurance companies and cash-rich non-financial corporations. CD issuances spiked in March due to tightened liquidity, as banks used CDs to address short-term funding needs at the fiscal year-end. Since April 2022, CD issuances have been on the rise, reaching Rs 1.17 trillion in March 2025. Total outstanding CD issuances climbed to a record Rs 11.75 trillion during FY2024–25. In September 2024, the average tenor of CD issuances dropped to 146 days, indicating that banks were raising funds for the short term while anticipating a fall in interest rates. This contrasts with the period from June 2019 to October 2021, when the average tenor increased from 95 days to 296 days, aligned with the start and peak of the interest rate easing cycle. However, by May 2022, when the central bank began raising policy rates, the average tenor had decreased to 128 days. During periods of rising interest rates, banks prefer locking in funds through longer tenor CDs. Conversely, in a rate-cutting cycle, longer tenor CDs are less attractive unless credit demand is particularly strong. 'Among various maturities, CDs issued for up to 91 days and those between 180 and 365 days dominate, highlighting their dual role as tools for short-term liquidity management and for locking short-term rates over longer horizons,' the report said.
