Amid heightened geopolitical and trade uncertainties, the Indian economy has exhibited considerable signs of resilience, a Reserve Bank of India (RBI) article said.
“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 ‘State of the Economy’ article published in the RBI’s June bulletin said.
The provisional estimates (PE) of national income released by the National Statistical Office (NSO) in May placed the country’s real gross domestic product (GDP) growth at 6.5 per cent for 2024-25, same as the Second Advance Estimates (SAE).
The dual engines of the country’s growth — private final consumption expenditure (PFCE) and gross fixed capital formation (GFCF) — contributed 4 percentage points and 2.4 percentage points, respectively, to GDP growth.
In terms of the quarterly trajectory, the Indian economy registered a growth of 7.4 per cent in Q4 FY25, notably higher than 6.4 per cent recorded in the preceding quarter. The pick-up in growth was mainly driven by fixed investment, which increased sharply to 9.4 per cent from a low of 5.2 per cent in the preceding quarter, owing to a sustained momentum in construction activity.
Despite a challenging external environment, the contribution of net exports to GDP was the highest since Q2 FY21.
The article said that 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 the entry-level segment. However, rural demand improved as evident from the increase in the retail sales of two-wheelers.
Story continues below this ad
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.
GST revenue collections surpassed the Rs 2 lakh crore-mark for the second consecutive month in May, boosted by import-related GST receipts.
Headline inflation, as measured by year-on-year changes in the all-India consumer price index (CPI), moderated to 2.8 per cent in May 2025 (the lowest since February 2019) from 3.2 per cent in April.
“The domestic prices situation remains benign with headline inflation staying below the target for the fourth consecutive month in May,” the article said.
Story continues below this ad
Financial conditions remained conducive to facilitate an efficient transmission of rate cuts to the credit market.
The article further said that foreign direct investment (FDI) inflows of $3.9 billion in April 2025, more than double the level in April 2024.
The country ranked 16th globally in FDI inflows and recorded $114 billion in greenfield investment in digital economy sectors over the last five years (2020-2024), the highest among all countries in the Global South, it said.
The article has been prepared by the central bank’s officials. The RBI said the views published in the article are of the authors and not of the institution.
