RBI releases Annual Report for FY 2024-2025: Key Takeaways [Find Report Here]

The Reserve Bank of India’s (RBI) Annual Report for FY 2024-25, released late Thursday, paints a picture of an economy that steered through a stormy global year with its macro-fundamentals largely intact, giving policy makers room to dial back monetary tightening even as fiscal consolidation accelerated. Real GDP growth eased but retained India’s status as the world’s fastest-growing major economy, inflation slipped closer to target and external buffers swelled – a combination the central bank believes will carry momentum into 2025-26. Want a deeper insight into the Income Tax Bill, 2025? Click here India’s real GDP expanded 6.5 per cent in FY 2024-25, down from 9.2 per cent the year before, but comfortably ahead of most peers. A services-led supply side and a rebound in agriculture outweighed a soft patch in manufacturing. On the demand side, private consumption strengthened while net exports swung positive, supported by services trade gains despite a wider merchandise deficit. Looking ahead, the Report says India is “poised to remain the fastest-growing major economy in 2025-26”, underpinned by easier financial conditions, healthier corporate and bank balance-sheets and the government’s capital-expenditure drive. Nevertheless, it flags global volatility, trade fragmentation and climate shocks as downside risks. Headline consumer-price inflation averaged 4.6 per cent in FY 2024-25, sinking below the 5 per cent mark for the first time in three years as core pressures receded and fuel turned deflationary. Food spikes linked to weather anomalies kept the Monetary Policy Committee (MPC) cautious, but by October 2024 it felt able to shift its stance from “withdrawal of accommodation” to “neutral”. With confidence growing that price gains would keep easing, the MPC trimmed the policy repo rate by 25 basis points to 6.25 per cent at its 7 February 2025 meeting, ending a two-year hold. Liquidity management complemented the pivot: the cash-reserve ratio was cut 50 bps to 4 per cent in December, injecting ₹1.16 trn, and the RBI supplemented this with term repos, outright bond buys and USD/INR swaps. The weighted-average call rate stayed barely 6 bps above the policy rate for the year. Step by Step Guide of Preparing Company Balance Sheet and Profit & Loss Account Click Here Monetary transmission remained “robust”, the central bank notes. The share of loans linked to external benchmarks continued to climb while MCLR-linked exposures shrank. Scheduled commercial banks saw further declines in gross and net non-performing asset ratios, healthy profitability and capital cushions comfortably above regulatory minima, results of which were stress-tested across adverse scenarios. Non-bank financial companies kept double-digit credit growth although unsecured lending moderated, and urban co-operative banks improved capital adequacy and asset-quality metrics. A slew of prudential measures – from model-risk guidelines to a prompt-corrective-action (PCA) framework for co-operatives – broadened supervisory coverage. The Centre bettered its deficit target, holding the FY 2024-25 gross fiscal deficit at 4.7 per cent of GDP, down from 5.5 per cent the previous year. Buoyant indirect-tax inflows, higher non-tax revenue (helped by a record ₹2.11 trn surplus transfer from the RBI) and disciplined expenditure management underpinned the improvement; gross tax revenue and non-tax revenue rose 11.2 per cent and 32.2 per cent respectively. States, too, aimed for prudence: their consolidated deficit is expected to close the year within the budgeted 3.2 per cent of GDP, despite front-loaded social spending. For FY 2025-26, both tiers intend to expand capital outlays further while keeping combined borrowing under 7.6 per cent of GDP. A modest 0.1 per cent uptick in merchandise exports and a 6.2 per cent rise in imports widened the goods trade deficit to US $ 282.8 bn. Robust services exports and record remittances, however, kept the current-account deficit contained at 1.3 per cent of GDP (Apr–Dec). Even with volatile portfolio flows – net FPI inflows were just US $ 1.7 bn versus US $ 41.6 bn a year earlier – the balance-of-payments recorded only a small reserve draw in the second half. Overall reserves climbed to US $ 668.3 bn by 31 March 2025, covering 11 months of imports. External debt remained the lowest among peer EMEs at 19.1 per cent of GDP, with short-term obligations comfortably covered by reserves. While the report devotes a full chapter to structural initiatives, three numbers stand out. First, the RBI’s Financial Inclusion Index moved up to 64.2 in March 2024, driven largely by deeper usage of digital channels. Second, the central-bank digital-currency pilot had on-boarded 60 lakh users and 17 banks by end-March. Third, two new tech repositories – one for fintechs, one for regulated entities – went live, expanding supervisory insight into AI, cloud and DLT adoption across the system. 3000 Illustrations, Case Studies & Examples for Ind-AS & IFRS - CLICK HERE The central bank judges the policy mix – easier rates, targeted liquidity support and sustained public capex – to be appropriately counter-cyclical against a still-uncertain world. It expects the normal monsoon forecast, softer commodity prices and the lagged impact of earlier tightening to push retail inflation “gradually towards target” in 2025-26, while growth benefits from recovering consumption and credit supply. That said, the Report lists tariff-war risks, geopolitics, climate events and elevated global debt as potential spoilers. With reserves, fiscal space and a more resilient financial system in place, India enters the new fiscal year better positioned than most to absorb another round of external shocks. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates