'Economy resilient, supply a worry'

MUMBAI: Domestic economic activity exhibited resilience in April, with industrial and services sectors maintaining strength across several segments, even as global uncertainties and geopolitical tensions continued to cast a shadow, RBI said in its latest State of the Economy article.

At the same time, the central bank struck a note of caution, stating that "India's near-term outlook is somewhat clouded by supply-side pressures". Even as it lay emphasis on the economy's resilience, RBI cautioned that "the external environment... continues to pose risks," reinforcing the need for close monitoring of inflationary pressures and global spillovers.

On prices, the central bank said "consumer price inflation (CPI) rose to 3.5% in April," largely due to food inflation, while "core inflation remained steady," indicating relatively contained underlying pressures. However, rising global commodity prices due to "elevated transportation and logistics costs" pose upside risks going forward.

The report highlights that the global environment remains "overshadowed by persistent geopolitical uncertainties," particularly tensions in West Asia, which have disrupted energy supplies, trade routes and logistics. These disruptions have "injected volatility into financial markets and clouded the macroeconomic outlook," while also pushing supply chain stress "to levels not seen since 2022."

Despite these headwinds, domestic growth impulses remain intact. The RBI noted that agriculture has also provided a cushion, with "summer sowing progressing well," supported by "above-normal pre-monsoon rainfall and comfortable reservoir levels."

Financial markets globally have remained volatile, with RBI observing that "bond yields hardened" amid inflation concerns, while equity markets saw intermittent recoveries driven by technology stocks and shifting risk appetite. India's external sector trends were mixed. The report pointed out that "net FDI remained positive but FPIs "continued to be net sellers."

In its concluding assessment, the RBI flagged a nuanced labour market picture. The Naukri JobSpeak Index showed "variability across months," suggesting uneven hiring trends, while PMI employment indices "remained consistently above 50," indicating an expansion in employment.

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