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US tariff uncertainties pose downside risk to demand in Indian economy: RBI Bulletin
Aug-29-2025

RBI Bulletin has indicated downside risk to the overall demand in the Indian economy owed to persisting uncertainties related to the US trade policies. It added that the near-term inflation outlook has become more benign than anticipated earlier driven by muted food price pressures supported by favourable base effects. Further, India's sovereign rating upgrade by S&P bodes well for capital inflows and sovereign yields, going forward.

Moreover, favourable rainfall and temperature conditions will support kharif agriculture season and an increase in real rural wages may aid rural demand in the second half of the financial year. Coupled with the benign financial conditions, ongoing transmission of rate cuts, supportive fiscal measures and rising household optimism, the environment is conducive for holding up aggregate demand.

In July, Reserve Bank of India (RBI) said that domestic economic activity remained mixed across sectors and the timely progress of monsoon has boosted kharif sowing. Meanwhile, industrial activity remained subdued, manufacturing sector expanded along with services sector sustaining the growth momentum. Further, headline inflation fell for the ninth consecutive month in July, while financial conditions remained congenial and supportive of domestic economic activity.

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