Syllabus:
GS3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.
Context:
Recently, the Reserve Bank of India released a monthly bulletin, June 2025 and notes that India’s economic activities remain resilient amidst global uncertainties.
More on the News
- The Reserve Bank of India Bulletin is issued monthly by the Department of Economic and Policy Research, Reserve Bank of India, under the direction of the Editorial Committee.
- As per the bulletin “The global economy is in a state of flux, reeling from the twin shocks of trade policy uncertainties and a spike in geopolitical tensions.”
- Domestic inflation remains gentle with headline inflation remaining below the target for the fourth consecutive month in May, supported by record domestic crop production in 2024–25, which has eased food price pressures.
Key Findings
- The provisional estimates (PE) of national income released by the National Statistical Office (NSO) in May pegged the country’s real GDP growth for 2024–25 at 6.5%, consistent with the figure reported in the Second Advance Estimates (SAE).
- The two main drivers 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 the overall GDP growth.
- In terms of the quarterly trajectory, the Indian economy registered a growth of 7.4% in Q4 FY25, notably higher than 6.4% recorded in the preceding quarter.
- The pick-up in growth was mainly driven by fixed investment, which increased sharply to 9.4% from a low of 5.2% 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.
- 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.
• The 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.
Factors Behind India’s Economic Resilience
- Government initiatives like Production-Linked Incentive (PLI) schemes, infrastructure push (PM Gati Shakti), and fiscal prudence have bolstered growth.
- A balanced mix of services, manufacturing, and agriculture reduces dependency on any single sector.
- Expansion of digital infrastructure (UPI, ONDC) and formalization (GST, e-Shram) have enhanced efficiency.
- A young workforce and rising entrepreneurship (Startup India) contribute to economic dynamism.