According to the Reserve Bank of India (RBI), the global economy is exhibiting steady growth amidst evolving political and technological landscapes, both of which have taken the centre stage in policy discourse during 2025 so far. The International Monetary Fund (IMF), in its January 2025 update of the World Economic Outlook (WEO), projected the global economy to grow by 3.3 per cent in 2025, close to that of 3.2 per cent in 2024, but below the average of 3.7 per cent witnessed during the first two decades of the 21st century.
Global consumer price inflation (CPI) declined in 2024 to 5.7 per cent (100 bps lower than a year back). The decline was more pronounced in the case of AEs, although the more recent prints have shown an increase in inflation in major Advanced Economies or AEs, with services inflation proving to be obdurate. Diverging inflation and growth outcomes are also reflected in monetary policy actions —the US holding rates steady, the UK and the euro area opting for a cut, and Japan raising its rate.
The potential impact of trade conflicts on currency and financial markets further confounds the choices policymakers face. However, the US trade policy uncertainty has spiked to levels last seen during the 2019 episode of US-China trade war and restrictive trade policies and fragmentation could lead to a long-term shift in global trade patterns rather than a short- term disruption, and upward pressures on consumer and business costs