RBI says India remains resilient as global trade landscape shifts

India is poised to weather ongoing global economic turbulence, according to the Reserve Bank of India’s (RBI) latest bulletin, which highlights strong macro fundamentals, easing inflation, and strategic foreign exchange management.

At the same time, New Delhi is navigating shifting global trade currents — from a critical tariff truce with the US to the successful conclusion of a landmark free trade agreement with the United Kingdom.

“The global economic outlook remains clouded amidst shifting policy landscapes and lingering vulnerabilities,” the RBI said in its May bulletin. “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.”

RBI eases rates, inflation cools

Retail inflation dropped to 3.16 per cent in April, marking the third consecutive month below the RBI’s 4 per cent target and the lowest level since July 2019. With inflationary pressures easing, the central bank adopted an ‘accommodative’ monetary policy stance, cutting rates for the second time in April and signalling further support to spur growth.

The bulletin also warned of increasing temperature anomalies affecting vegetable prices, calling for quicker adoption of climate-resilient crops to support long-term price stability.

Forex reserves surge amid rupee rally

In a sign of active intervention, the RBI reported a net purchase of $14.36 billion in the spot foreign exchange market in March, reversing a $1.6 billion net sale in February. This move came as the Indian rupee appreciated over 2 per cent during the month, buoyed by a weaker US dollar and strong foreign inflows.

The rupee traded between 85.39 and 87.44 per US dollar in March and stood at 85.6375 on 22 May. Meanwhile, the RBI’s net forward sale contracts stood at $84.35 billion by end-March, indicating continued efforts to manage currency volatility.

IMF outlook: India to remain fastest-growing major economy

The International Monetary Fund (IMF) echoed a similarly positive tone. In its latest World Economic Outlook, the IMF projected India’s economy to grow by 6.8 per cent in 2025, making it the fastest-growing major economy in the world.

The Fund credited robust domestic demand, public infrastructure spending, and resilient services exports for India’s growth momentum, even as global growth remains subdued.

The IMF also praised India’s efforts in maintaining macroeconomic stability, especially amid tight global financial conditions and ongoing geopolitical uncertainty.

Navigating to global trade tension

The RBI’s optimism comes as India recalibrates its global trade strategy. Following President Donald Trump’s 9 April announcement of a 90-day tariff pause, India is racing to clinch a trade deal with the US to prevent a punitive 26 per cent tariff on Indian exports.

The pause provides a narrow window for negotiation, with New Delhi eyeing quicker access for key sectors such as pharmaceuticals, textiles, and IT services.

In contrast, India has scored a major breakthrough on the western front. Earlier this month, India and the UK concluded negotiations for a long-awaited free trade agreement (FTA) — a deal in the works since January 2022.

The India-UK trade pact aims to double bilateral trade from $60 billion to $120 billion by 2030. It eliminates import duties on 99 per cent of Indian goods entering the UK, granting enhanced access for sectors such as textiles, gems and jewellery, auto parts, and agriculture.

In return, British firms will gain broader access to India’s fast-growing market, including in areas like legal services, education, and renewable energy.

India has also ensured protection for sensitive sectors, maintaining a balance between liberalisation and domestic interests.