Amid a generally subdued global backdrop, a few positive signs emerge.

True, S&P Global recently revised its global growth forecast downward to 2.7% from 3.3%. It also highlighted that the primary macroeconomic risk over the next 12 months is likely to stem from the potential for higher tariffs, ongoing uncertainty and financial market volatility to trigger a sharp downturn in real economic activity, both in the United States and globally.

Nonetheless, there are several positive developments worth noting:

• Inflation trends: Consumer inflation has rapidly softened to at 3.2% in April, the lowest since July 2019. A record wheat harvest and strong pulses output, along with a favourable monsoon forecast for the kharif season, are expected to control food inflation, enabling a sustained reduction in interest rates.
• Impact on urban consumption: Lower inflation is likely to improve discretionary spending in urban areas, supported by low interest rates and recent tax cuts, which could boost consumption.
• Easing trade tensions: There has been a modest easing in trade tensions between the US and China, with the countries agreeing to reduce reciprocal tariffs by 115% for 90 days. Although uncertainty persists, the situation suggests a reduction in reciprocal tariffs for other countries too.
• India-UK Free Trade Agreement: In early May, India finalised a free trade agreement (FTA) with the United Kingdom (UK). The FTA includes tariff cuts and broad market access across sectors.