FPJ News Service mumbai

Domestic economic activity held up in June, with high-frequency indicators pointing to improving prospects of the kharif agricultural season and continuation of strong momentum in the services sector, the Reserve Bank of India said in its monthly bulletin released on Wednesday.

The global macroeconomic environment, however, remained fluid in June and July so far amidst geo-political tensions and tariff policy uncertainties. “High-frequency indicators for industrial activity recorded modest growth in June. Growth in rural demand remained resilient and was accompanied by a recovery in urban economic activity.

“Amidst global economic uncertainties, the front-loading of spending by the central and state governments, with a focus on higher capex, is helping to offset some slowdown witnessed in private capex expenditure. India’s merchandise trade deficit narrowed in June 2025, due to contraction in both oil and non-oil trade deficit,” the central bank said. Headline CPI inflation remained below 4% for the fifth consecutive month in June driven by deflation in food prices. System liquidity remained in surplus to facilitate a faster transmission of policy rate cuts to the credit markets.

Since the pandemic, the global economy has experienced large gyrations in crude oil prices. India, being a net oil importer, has remained susceptible to the vagaries of global crude oil prices and has been actively intervening in the domestic fuel market to contain the adverse fallout of higher oil prices on domestic inflation and output.

Empirical estimates suggest that a 10% rise in global crude oil prices could increase India’s headline inflation by around 20 bps on a contemporaneous basis. In the post-pandemic period, the impact on inflation, although largely contained, has been statistically significant with the surge in crude oil prices owing to the post-pandemic demand revival, which further intensified due to the supply chain disruptions caused by the outbreak of the Russia-Ukraine war in early 2022.  Headline inflation, as measured by y-o-y 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.