Current Affairs - Economy

The World Trade Organization has projected a 0.2% decline in global merchandise trade for 2025, reflecting heightened trade tensions and increasing uncertainty in global trade policy. This figure contrasts with the 2.9% growth seen in 2024 and underscores a troubling shift driven largely by tariff measures and ongoing disputes, particularly between the US and China. The WTO warns that if these tensions worsen, the contraction could deepen significantly. While global services trade is expected to grow modestly at 4.0%, the slowdown in merchandise trade affects key service sectors like transport and investment. Least-developed countries are especially vulnerable due to their dependence on exports.

According to UNCTAD's "Trade and Development Foresights 2025" report, India is expected to grow at a rate of 6.5% in 2025, maintaining its position as the fastest-growing major economy in the world. This growth is supported by strong government spending, including infrastructure and social sector investments, as well as a supportive monetary policy stance by the Reserve Bank of India (RBI), which has helped stimulate demand and economic activity despite global economic challenges.

In March 2025, India witnessed a significant drop in retail inflation to 3.34%, marking its lowest level since August 2019. This easing was primarily driven by a sharp decline in food inflation, which fell to 2.69%. The drop in prices of essential food items like vegetables, eggs, pulses, meat, fish, and milk played a key role in bringing overall inflation down. Reflecting this positive trend, the Reserve Bank of India adjusted its inflation forecast for 2025–26 to 4.0% from an earlier projection of 4.2%, attributing the change to improved prospects in food prices.

Crisil has projected India’s GDP growth rate for the financial year 2025–26 at 6.5%. This projection reflects optimism backed by factors like expected monetary easing, tax relief, and a favourable monsoon, which could stimulate agricultural output and consumption. Despite these positive indicators, the forecast includes caution over potential risks such as increased US tariffs that may affect global investor confidence and reduce investment inflows. On the upside, lower crude oil prices and stronger domestic demand are anticipated to bolster economic momentum, making the 6.5% estimate a balanced outlook amidst both opportunities and external challenges.

The Reserve Bank of India reduced the repo rate by 0.25%, or 25 basis points, bringing it down from 6.25% to 6%. This marks the second consecutive rate cut of the same magnitude, indicating a clear shift in the RBI's approach towards supporting economic growth amid a global slowdown and domestic demand concerns. The Monetary Policy Committee unanimously agreed to the rate cut and also changed the policy stance from “neutral” to “accommodative,” which implies a greater likelihood of further cuts in the future. This move is aimed at easing borrowing costs to stimulate consumption and investment, especially during uncertain global trade conditions.