Page 4 - Policy Economic Report - July 2025

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Executive Summary

According to World Bank, global growth is expected to weaken to 2.3 percent in 2025, with deceleration
in most economies relative to last year. This is due to a substantial rise in trade barriers and the pervasive
effects of an uncertain global policy environment. This would mark the slowest rate of global growth since
2008, aside from outright global recessions. Thereafter, growth is forecasted to firm to about 2.5 percent
over 2026-27, as trade flows continue adjusting to higher tariffs such that global trade edges up, while
policy uncertainty moderates from record-high levels. Global inflation is projected to average 2.9 percent
in both 2025 and 2026, before easing to 2.5 percent in 2027—in line with the average inflation target.

The outlook for global inflation has become more uncertain since last year due to a combination of shocks.
Most notably, substantial tariff hikes are set to exert upward pressure on consumer inflation in key
economies by raising prices for imported consumer goods and inputs into production and redirecting
demand toward domestic production that is relatively inelastic in the short run.

India’s growth story continues to draw global attention, backed by strong fundamentals and consistent
performance. Real GDP, which measures the economy’s output expanded by 6.5 per cent in 2024–25. The
Reserve Bank of India expects this pace to continue into 2025–26. With 6.5% GDP growth, India stands
as the fastest growing major economy.

This sustained performance is being driven by strong domestic demand. Rural consumption has picked
up, city spending is rising, and private investment is on the upswing. Businesses are expanding capacity,
with many operating near their maximum output levels. At the same time, public investment remains
high, especially in infrastructure, while stable borrowing conditions are helping firms and consumers make
forward-looking decisions.

Headline inflation-: Year-on-year inflation rate based on All India Consumer Price Index (CPI) for the month
of June, 2025 over June, 2024 is 2.10% (Provisional). There is decline of 72 basis points in headline inflation
of June, 2025 in comparison to May, 2025. It is the lowest year-on-year inflation after January, 2019.

Food Inflation: Year-on-year inflation rate based on All India Consumer Food Price Index (CFPI) for the
month of June, 2025 over June, 2024 is -1.06% (Provisional). Corresponding inflation rates for rural and
urban are -0.92% and -1.22%, respectively. A sharp decline of 205 basis points is observed in food inflation
in June, 2025 in comparison to May, 2025. The food inflation in June, 2025 is the lowest after January,
2019.

Policy repo rate was reduced by 50 basis points (bps) to 5.50 per cent. There will be consequent
adjustment of the Standing Deposit Facility (SDF) rate under the Liquidity Adjustment Facility (LAF) to 5.25
per cent and of the Marginal Standing Facility (MSF) rate and the Bank Rate to 5.75 per cent. RBI expects

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