Reserve Bank of India Releases July 2025 Issue of Bulletin

Strategic Insights -

The Reserve Bank of India's July 2025 issue of its monthly Bulletin features four speeches, four articles, and current statistics. The Bulletin provides an analysis of the state of the economy, the impact of global crude oil price movements on headline inflation, determinants of overnight uncollateralised money market volume, and household inflation expectations in India.

Key Takeaways:

  • The global macroeconomic environment remains fluid in June and July, with geo-political tensions and tariff policy uncertainties affecting domestic economic activity. Despite this, India's economy has shown resilience, with improving kharif agricultural season prospects, strong momentum in the services sector, and modest growth in industrial activity.
  • The impact of global crude oil price movements on headline inflation in India is statistically significant, with a 10% rise in global crude oil prices potentially increasing India's headline inflation by around 20 basis points on a contemporaneous basis. Government measures have limited the impact of global crude oil price fluctuations on headline inflation.
  • The uncollateralised money market holds a pivotal position in India's monetary framework, with system liquidity conditions, spread of the weighted average call rate over the policy repo rate, and divergence of overnight forward premia from interest rate differentials influencing trading volumes.
  • Household inflation expectations in India have been elevated since the COVID-19 pandemic and geopolitical tensions, with households exhibiting systematic upward bias compared to professionals and businesses. Monetary policy actions have been successful in anchoring inflation expectations, with headline inflation being more influential than food inflation.

Statistics:

  • India's headline CPI inflation remained below 4% for the fifth consecutive month in June, driven by deflation in food prices.
  • The external sector has remained resilient, backed by ample foreign exchange reserves and a moderate external debt-to-GDP ratio.
  • System liquidity remained in surplus to facilitate a faster transmission of policy rate cuts to the credit markets.
  • The bulk of trades in the call money market occur in the first hour of any given day, with primary dealers tending to fulfil their funding needs early in the day.
  • Co-operative banks' participation in call money market decreased significantly after the Reserve Bank's directive for mandatory membership on NDS-CALL trading platform, but has rebounded in recent months.

Sources:

  • Reserve Bank of India. (2025). Bulletin, July 2025 issue.
  • Sujata Kundu, Soumasree Tewari, and Indranil Bhattacharyya. (2025). Revisiting the Oil Price and Inflation Nexus in India. In Reserve Bank of India. Bulletin, July 2025 issue.
  • Srijashree Sardar and Alqama Pervez. (2025). Determinants of Overnight Uncollateralised Money Market Volume -- An Empirical Assessment. In Reserve Bank of India. Bulletin, July 2025 issue.
  • Ankit Ruhi, Kanupriya Sharma, and Subhadhra Sankaran. (2025). Household Inflation Expectations in India: Emerging Trends, Determinants and Impact of Monetary Policy. In Reserve Bank of India. Bulletin, July 2025 issue.