The Reserve Bank of India’s latest monthly bulletin highlights growing concerns over a weakening global economy, driven by escalating trade and tariff tensions and accompanying financial market volatility. While these global developments could dampen India’s growth through reduced external demand, the RBI notes that the country’s domestic growth engines—consumption and investment—remain relatively insulated from external shocks.
Agricultural prospects have received a boost with the forecast of an above-normal southwest monsoon in 2025, which is expected to enhance farm incomes and help stabilize food prices. Supporting this outlook, headline inflation fell to a 67-month low of 3.3% in March, primarily due to softer food prices.
The bulletin also emphasizes the evolving global economic scenario, identifying trade policy uncertainty as a critical short-term risk. On April 2, 2025, the United States introduced a 10% base tariff along with reciprocal levies affecting around 60 countries—raising average U.S. tariffs to their highest in over a century. A temporary 90-day pause on tariff implementation was granted on April 9 for nations that refrained from retaliatory measures.
These policy shifts have intensified fears of a global trade war. While countries deliberate their responses, the adverse impact on global growth appears unavoidable. The International Monetary Fund (IMF) has warned that these tariffs pose a “significant risk” to the already sluggish global outlook. Similarly, the Organization for Economic Co-operation and Development (OECD) anticipates that mounting trade restrictions will raise costs for both producers and consumers worldwide.
