Overview

• RBI’s August State of Economy article warns that persisting India–US trade‑policy uncertainty threatens aggregate demand after the United States implemented 50% tariffs on most Indian goods, phased in on Aug. 7 and Aug. 27.
• The central bank notes that roughly 13% of India’s merchandise exports face direct exposure to the higher levy.
• Headline inflation fell to an eight‑year low in July and is projected to dip below the 4% target in the second quarter before edging up later in the year, leaving the annual average significantly under target.
• Favourable monsoon conditions, rising real rural wages, benign financial conditions, supportive fiscal measures and the ongoing transmission of earlier rate cuts are expected to help hold up demand.
• S&P’s sovereign rating upgrade is seen lowering borrowing costs and boosting investor confidence even as foreign portfolio investors sold equities in July and August, with domestic mutual fund inflows cushioning markets.